UNIQLO Operations - TextilWirtschaft
UNIQLO Operations - TextilWirtschaft
UNIQLO Operations - TextilWirtschaft
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Year ended August 31, 2007
FAST RETAILING Goes Global…<br />
Our motive power is our spirit of innovation and challenge.<br />
Our stage is the vast expanse of the globe.<br />
Our mission is to inspire changes and challenge what is taken for granted in the apparel industry.<br />
Our goal is to enrich the lives of people by designing, producing, and selling better clothes.<br />
We are determined to go global, and ready to meet the challenges before us.<br />
FAST RETAILING ANNUAL REPORT 2007 01
<strong>UNIQLO</strong><br />
02<br />
FAST RETAILING ANNUAL REPORT 2007<br />
COMPTOIR DES COTONNIERS
CONTENTS<br />
PRINCESSE TAM.TAM Theory Real Riche<br />
04 FAST RETAILING at a Glance<br />
06 Message from the CEO<br />
08 Group and M&A Strategy<br />
10 Corporate Governance<br />
11 <strong>UNIQLO</strong> <strong>Operations</strong><br />
23 Japan Apparel <strong>Operations</strong><br />
29 Global Brand <strong>Operations</strong><br />
35 Corporate Social Responsibility<br />
42 Financial Section<br />
66 History<br />
68 Investor Information<br />
69 Corporate Information<br />
FAST RETAILING ANNUAL REPORT 2007 03
FAST RETAILING at a Glance<br />
<strong>UNIQLO</strong> Accelerates the Opening<br />
of Large-Format Stores in Japan<br />
■ <strong>UNIQLO</strong> in Japan is implementing a large-format<br />
store strategy. In spring 2007, <strong>UNIQLO</strong> successfully<br />
opened two stores with about 3,300m2 of floor space —<br />
the Kobe Harborland store and Tokyo’s Setagaya<br />
Chitosedai store. <strong>UNIQLO</strong> is pressing forward with<br />
product development with these large-format stores in<br />
mind and is winning even higher levels of customer<br />
satisfaction.<br />
FAST RETAILING Has a Strategy for the Future<br />
04<br />
FAST RETAILING ANNUAL REPORT 2007<br />
<strong>UNIQLO</strong> Setagaya Chitosedai store, Tokyo<br />
New Flagship Stores Boost <strong>UNIQLO</strong>’s Brand Profile Abroad<br />
■ Following the opening of our global flagship store in New York’s trendy<br />
Soho district, we opened another on London’s Oxford Street in November<br />
2007. <strong>UNIQLO</strong> is making its presence felt in the rest of the world through this<br />
new foothold in one of Europe’s best-known shopping areas. In December<br />
2007, we opened our first store in Paris, thus taking another step toward<br />
making <strong>UNIQLO</strong> a world brand.<br />
Recycling of All Products Begins<br />
■ In September 2006, <strong>UNIQLO</strong> began a drive in<br />
Japan to promote the recycling of all its products.<br />
During the fiscal year ended August 31, 2007,<br />
<strong>UNIQLO</strong> made available about 140,000 products<br />
brought to its stores by customers for recycling as<br />
relief clothing for the needy overseas.<br />
<strong>UNIQLO</strong> 311 Oxford Street store, London<br />
FAST RETAILING, with the <strong>UNIQLO</strong> casual wear brand as its core business, is continuing to<br />
expand and grow as an apparel retail group not only in Japan but also in world markets. In its core<br />
<strong>UNIQLO</strong> operations, the Group had 748 stores in Japan and 39 in overseas markets (as of August<br />
31, 2007) and has established its highly profitable SPA business model (Specialty Store Retailer of<br />
Private Label Apparel), which integrates all stages from design through production and sales.<br />
The FAST RETAILING Group is global in scope and comprises the <strong>UNIQLO</strong> business, which is<br />
opening more <strong>UNIQLO</strong> stores in Japan and overseas; Japan Apparel operations that include chain<br />
store retailers of apparel and shoes, such as CABIN, G.U., and ONEZONE; and Global Brands<br />
operations.
Message from the CEO<br />
Continuing to Address New Challenges<br />
to Become a Truly Global Company<br />
During fiscal 2007, the year ended August 31, 2007,<br />
we reported an increase in consolidated net sales but,<br />
regrettably, net income declined. Despite this, it was a<br />
year when we at FAST RETAILING gained conviction<br />
about the future course of our development. To reach<br />
the goal we have set of becoming “the world’s No. 1<br />
apparel retailer,” we embarked aggressively on a series<br />
of initiatives, including increasing the number of larger<br />
<strong>UNIQLO</strong> stores in Japan, expanding <strong>UNIQLO</strong>’s operations<br />
into overseas markets, and working toward the<br />
closer integration of the FAST RETAILING Group of<br />
companies. Fiscal 2007 was a year when we as a<br />
group of enterprises experienced “labor pains.”<br />
Nonetheless, this experience has made all our management<br />
and staff not only think even more seriously<br />
about making our <strong>UNIQLO</strong> operations even stronger,<br />
but also focus more on entrepreneurial values, group<br />
integration, and globalization. I believe, therefore, that<br />
fiscal 2007 was a year that gave us new resolve and<br />
determination to attain these objectives.<br />
In our <strong>UNIQLO</strong> operations, which are our core business,<br />
we opened a global flagship store in New York in<br />
November 2006, and it has been a success. Moreover,<br />
sales and earnings in our <strong>UNIQLO</strong> activities in the rest<br />
of Asia, such as China, including Hong Kong, and<br />
Korea, expanded, and we are in sight of new opportunities<br />
for development.<br />
In proceeding with the expansion of our overseas<br />
operations, what has impressed me most is that our<br />
customers around the world have so highly appreciated<br />
the quality of <strong>UNIQLO</strong> products. We believe that our<br />
efforts to ensure top quality for our cashmere items,<br />
merino wool sweaters, printed T-shirts, jeans, and<br />
other products are now appreciated by customers not<br />
only in Japan but also around the globe. We believe<br />
that maintaining quality is precisely what will position us<br />
to be able to realize our strengths in overseas markets.<br />
With this renewed awareness, in November 2007,<br />
we opened another global flagship store in London. In<br />
addition, in December we opened a concept shop in<br />
La Defense, outer Paris, marking <strong>UNIQLO</strong>’s first foray<br />
into the French market. Going forward, we plan to step<br />
06<br />
FAST RETAILING ANNUAL REPORT 2007<br />
up our activities to establish stores not only in the<br />
European markets but also within the Asian markets,<br />
especially in China and Korea.<br />
We reported a strong increase in sales but a decline<br />
in profits in our domestic <strong>UNIQLO</strong> operations for the<br />
fiscal year under review; the increases in expenses<br />
exceeded the positive benefits of higher sales. While a<br />
profit decline is never a welcome thing, it has served as<br />
a wake-up call for me and our staff, a reminder that we<br />
must return to fast decision making and low-cost<br />
management. Furthermore, we were not responsive<br />
enough to market nuances, which resulted in lowering<br />
gross margins.<br />
During the fiscal year ending August 2008, <strong>UNIQLO</strong><br />
in Japan is returning to its original concept of low-cost<br />
management while also working to rejuvenate its sense<br />
of speed and dynamism, which are essential elements<br />
of its corporate culture. High on our agenda for this fiscal<br />
year are attaining high profit margins by producing<br />
the optimal volume of superbly finished basic casual<br />
apparel suited to the needs of our customers.<br />
During the fiscal year under review, <strong>UNIQLO</strong> in<br />
Japan began accelerating the opening of its new concept,<br />
large-format stores with about 1,600m2 of sales<br />
space. The key to <strong>UNIQLO</strong>’s growth in the domestic<br />
market going forward will be the success of this largeformat<br />
store strategy. To make this strategy a success,<br />
it is clear that we must address the challenges of<br />
developing products for the women’s market, which<br />
has a high potential for growth. To this end, we are moving<br />
forward to strengthen our global R&D capabilities.<br />
In our Japan Apparel operations, we are still in the<br />
process of restructuring the activities of ONEZONE,<br />
CABIN, and other subsidiaries and enhancing the performance<br />
of G.U., one of our new businesses, but I<br />
believe we have not yet delivered satisfactory results.<br />
However, we are convinced that there is further potential<br />
demand in the markets for shoes, women’s apparel,<br />
and low-priced casual apparel. By drawing together<br />
the Group’s resources to provide support in management,<br />
infrastructure, and personnel, we are committed<br />
to putting these operations on the path to growth.
In our Global Brand operations, French casual<br />
COMPTOIR DES COTONNIERS and lingerie creator<br />
PRINCESSE TAM.TAM are reporting steady gains in<br />
performance. We are convinced that these businesses,<br />
which feature a clear brand concept, have major<br />
potential for growth. Looking ahead, we plan to continue<br />
our M&A activities to secure outstanding brands<br />
such as these and expand their business operations<br />
globally.<br />
My belief is that unless we become a company<br />
capable of competing globally, we cannot survive in<br />
our domestic market. As the world changes around us<br />
hour by hour, the boundaries separating different<br />
industries and nations have been disappearing. Within<br />
this business environment, how can we survive? One<br />
of the answers to this question is that, just as <strong>UNIQLO</strong><br />
has grown in Japan, we can and must develop<br />
<strong>UNIQLO</strong>’s operations in world markets. At the same<br />
time, we also believe that FAST RETAILING must<br />
become a group of enterprises with several global<br />
brands that can expand into world markets. The target<br />
I have set of attaining “annual sales of ¥1 trillion” is not<br />
a final goal, but only a milestone along the way to<br />
further growth and development.<br />
FAST RETAILING has a clear long-term strategy and<br />
is managing its activities to achieve a balanced, efficient<br />
business portfolio. We are intent on becoming a<br />
world-class enterprise not only in terms of net sales,<br />
profitability, and customer satisfaction, but also talents<br />
and diversity of our human resources, and our contributions<br />
to society. We intend to continue to address<br />
and overcome the challenges ahead of us to create<br />
and manufacture, then deliver and sell truly excellent<br />
apparel to our customers that will enrich the livelihood<br />
of the peoples of the world.<br />
December 2007<br />
Tadashi Yanai<br />
Chairman, President and CEO<br />
FAST RETAILING ANNUAL REPORT 2007 07
Group and M&A Strategy<br />
Building a Strong Portfolio and Aiming for Group Net Sales of ¥1 Trillion<br />
and Ordinary Income of ¥150 Billion in 2010<br />
Market Environment<br />
Growth in the world’s apparel and fashion industries in recent<br />
years has been driven by the countries and regions of<br />
Europe, North America, Japan, and other developed countries<br />
in the fashion industry. In 2007, however, there were not<br />
conspicuous megatrends in the industry, and the business<br />
environment has become more challenging. Along with these,<br />
growth in the European, North American, and Japanese markets<br />
has slowed. In addition, economic conditions produced<br />
uncertainty due to the emergence of the subprime loan issues<br />
originating in the United States, and we believe this is gradually<br />
beginning to have an adverse impact on consumer attitudes<br />
toward apparel and other expenditures.<br />
On the other hand, in emerging economies, such as China<br />
and Russia, that are experiencing rapid economic growth,<br />
consumer spending on apparel and fashion items is continuing<br />
to increase, propelled by the strong demand among the<br />
expanding middle-income classes. Yet, even in these emerging<br />
markets, demand is strong for global brands that are popular<br />
in the world’s principal fashion centers, such as New York,<br />
Paris, Milan, London, and Tokyo.<br />
Amid this market environment, most of the top SPA<br />
(Specialty Store Retailer of Private Label Apparel) players with<br />
a global presence are reporting rapid growth and expansion<br />
in market share based on their financial and development<br />
capabilities that derive from economies of scale. As markets<br />
become increasingly global, to survive in today’s torrent,<br />
companies in the apparel and fashion industries are confronted<br />
with the need to develop product offerings that differentiate<br />
them from competitors and establish brands that appeal<br />
to consumers throughout the world.<br />
08<br />
Worldwide Apparel Specialty Stores<br />
Company Name End of Sales* Change (%)<br />
(Flagship Brand) Country Fiscal Year (¥ Billions) (local base)<br />
Gap Inc. U.S. Jan. 2007 1,850 -0.5<br />
Inditex, S.A. (ZARA) Spain Jan. 2007 1,299 +21.6<br />
Limited Brands, Inc. U.S. Jan. 2007 1,238 +10.0<br />
Hennes & Mauritz AB (H & M) Sweden Nov. 2006 1,155 +11.7<br />
NEXT PLC U.K. Jan. 2007 767 +5.7<br />
Liz Claiborne Inc. U.S. Dec. 2006 579 +3.0<br />
FAST RETAILING Japan Aug. 2007 525 +17.0<br />
Polo Ralph Lauren Corporation U.S. Mar. 2007 498 +14.6<br />
Esprit Holdings Limited China June 2007 441 +26.9<br />
Abercrombie & Fitch Co. U.S. Jan. 2007 385 +19.2<br />
Source: Compiled from the annual reports of the companies listed above.<br />
* Figures calculated based on foreign exchange rates as of August 31, 2007.<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Group Strategy<br />
For FAST RETAILING to compete among the world’s top<br />
players, we believe it is essential, at a minimum, for it to<br />
expand its portfolio of Group businesses that have worldclass<br />
capabilities and attain net sales of ¥1 trillion. That is why<br />
we have set a goal of becoming “a Group with annual net<br />
sales of ¥1 trillion and ordinary income of ¥150 billion.”<br />
First, the Group’s core <strong>UNIQLO</strong> operations have established<br />
a position as a top player among SPA enterprises that<br />
are integrated from manufacturing through retail sales.<br />
<strong>UNIQLO</strong> is moving ahead with the development of even more<br />
competitive materials and products by drawing on the<br />
economies of scale of its operations and partnerships with<br />
leading partners. In addition, to establish its position as a<br />
global brand, <strong>UNIQLO</strong> is implementing a flagship store strategy<br />
in the principal fashion cities in Europe and North America.<br />
In parallel with this strategy, in the fast-growing markets of<br />
Asia, <strong>UNIQLO</strong> is accelerating the opening of stores in China<br />
(including Hong Kong) and Korea.<br />
In Japan Apparel operations, we see growth potential in<br />
the footwear business of ONEZONE and VIEWCOMPANY,<br />
the women’s apparel chain store business of CABIN, and the<br />
low-price apparel business of G.U.<br />
In Global Brand operations, COMPTOIR DES COTONNIERS,<br />
PRINCESSE TAM.TAM, and Theory are fully capable of competing<br />
in global markets. We plan to further develop and grow<br />
these brands in world markets and add strong brands to our<br />
portfolio through M&A.<br />
Group Sales Scenario<br />
� <strong>UNIQLO</strong> Japan<br />
� <strong>UNIQLO</strong> International<br />
� Existing Businesses � New Businesses<br />
(Billions of Yen)<br />
1,000<br />
500<br />
0<br />
FY ’06 ’07<br />
’10<br />
Note: Net sales do not include companies accounted for<br />
under the equity method (such as LINK THEORY<br />
HOLDINGS CO.,LTD., and VIEWCOMPANY<br />
CO.,LTD.).
M&A Strategy<br />
■ Objectives of M&A<br />
We have two objectives in our M&A activities. The first is to<br />
acquire businesses in new areas to strengthen our business<br />
portfolio. The second is to gain access to new business platforms<br />
for greatly expanding overseas activities of <strong>UNIQLO</strong><br />
and other Group businesses.<br />
In strengthening our portfolio, we aim to develop our global<br />
brand businesses, by purchasing competitive brands capable<br />
of global expansion in the affordable luxury market, such as<br />
COMPTOIR DES COTONNIERS. Among the world’s fashion<br />
apparel markets, the affordable luxury market has the highest<br />
growth potential, and we believe that in this market, too, an<br />
SPA enterprise—integrated from product design through<br />
manufacturing, marketing, and sales—will be able to prove<br />
its mettle.<br />
Regarding the second objective of gaining access to new<br />
platforms, we believe that securing business bases through<br />
investments in and acquisitions of existing local enterprises<br />
overseas is the best possible way to accelerate the growth of<br />
<strong>UNIQLO</strong> and other Group brands in overseas markets.<br />
Through M&A, FAST RETAILING aims to secure talented<br />
professionals who bring a global view to their work, and, at<br />
the same time, hopes to remain a dynamic and innovative<br />
group of enterprises by offering opportunities to employees<br />
who share the Group’s vision.<br />
<strong>UNIQLO</strong> Japan<br />
<strong>UNIQLO</strong><br />
Group Net Sales by Business in Fiscal 2007<br />
<strong>UNIQLO</strong><br />
International<br />
U.K.<br />
China / Hong Kong<br />
Korea<br />
U.S.<br />
France<br />
FAST RETAILING<br />
¥525.2 billion<br />
Japan Apparel<br />
<strong>Operations</strong><br />
Global Brand<br />
<strong>Operations</strong><br />
¥424.7 billion ¥16.9 billion ¥46.0 billion ¥36.7 billion<br />
Note: Net sales do not include companies accounted for under the equity method (such as<br />
LINK THEORY HOLDINGS CO.,LTD., and VIEWCOMPANY CO.,LTD.).<br />
■ Investment Criteria and Decision-Making Process<br />
The two criteria in selecting M&A deals are growth potential<br />
and profitability. The key condition related to growth potential<br />
is whether the acquiree has a good brand that has the potential<br />
to develop globally. COMPTOIR DES COTONNIERS and<br />
lingerie brand PRINCESSE TAM.TAM are good examples of<br />
such brands. If the acquiree has a good brand with a solid<br />
underlying brand concept, we will actively share our<br />
infrastructure — the financial resources of the FAST<br />
RETAILING Group, our know-how in store operations, sales<br />
planning, inventory management, production systems in<br />
China, and information systems — to realize high growth and<br />
profitability.<br />
When making investment decisions, M&A proposals are<br />
prepared by a specialized unit and then assessed by related<br />
departments and officers and directors. Thereafter, the proposals<br />
are subjected to careful examination by the Board of<br />
Directors, which includes three external directors.<br />
Examination of proposed M&A deals includes the valuation of<br />
assets to be acquired, the projected return on investment,<br />
and the analysis of synergies with other Group businesses.<br />
Going forward, FAST RETAILING will consider acquiring<br />
enterprises with the potential for global development that are<br />
capable of attaining annual net sales of ¥100 billion or more<br />
and a ratio of ordinary income to net sales of 15% or more.<br />
We intend to actively pursue our Group and M&A strategy,<br />
invest between ¥300 billion and ¥400 billion in acquisitions,<br />
as well as aim to achieve high and sustained growth of the<br />
Group.<br />
Strategic Milestones of the FAST RETAILING Group<br />
2004 January ■ Acquired an equity stake in Link<br />
International Co., Ltd., developer of the<br />
THEORY brand<br />
2005 March ■ Acquired ONEZONE CORPORATION<br />
May ■ Obtained management control of NELSON<br />
FINANCE S.A.S., developer of the<br />
COMPTOIR DES COTONNIERS brand<br />
2006 February ■ Acquired PETIT VEHICULE S.A., developer<br />
of the PRINCESSE TAM.TAM brand<br />
March ■ Established G.U. CO., LTD.<br />
April ■ Invested in CABIN and concluded an<br />
operating alliance<br />
November ■ Invested in VIEWCOMPANY CO.,LTD.<br />
2007 August ■ Made CABIN into a wholly owned<br />
subsidiary through a takeover bid<br />
FAST RETAILING ANNUAL REPORT 2007 09
Corporate Governance<br />
Masa Matsushita (47)<br />
Director<br />
Appointed in 2005<br />
External Director, <strong>UNIQLO</strong><br />
President, FR FRANCE S.A.S.<br />
External Director, LTH<br />
Creating a Reliable Corporate Governance Structure<br />
Board of Directors to Enhance Transparency<br />
of Corporate Activities<br />
The Board of Directors receives its mandate from shareholders<br />
and makes decisions on important management matters. To<br />
ensure transparency in management, the Board—consisting of<br />
directors in charge of operations and external directors—<br />
discusses and makes decisions on such important matters as<br />
the annual budget, settlement of accounts, operating plans,<br />
proposals for acquisitions and investments, personnel matters<br />
related to Officers, organizational reforms, and dividend policy.<br />
Board deliberations are based on detailed information. For<br />
items that are considered especially important, the directors<br />
are briefed by related departments and usually hold a number<br />
of meetings.<br />
During the fiscal year under review, the Board met 25 times<br />
to discuss a range of topics. These included the approval of<br />
the financial statements, issues related to <strong>UNIQLO</strong>’s operations<br />
Corporate Governance at FAST RETAILING (as of December 31, 2007)<br />
Report<br />
Board of Auditors<br />
(4 out of 5 are external)<br />
Oversee<br />
10<br />
Accounting Auditors<br />
Internal Audit Department<br />
Tadashi Yanai (58)<br />
Chairman, President, and CEO<br />
Appointed in 1972<br />
CEO, <strong>UNIQLO</strong><br />
Director & Chairman, LTH<br />
Director & Chairman, CABIN<br />
External Director, VIEWCOMPANY<br />
Shareholders (General Meeting of Shareholders)<br />
Elect/dismiss Elect/dismiss<br />
Audit<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Toru Hanbayashi (70)<br />
External Director<br />
Appointed in 2005<br />
Former President, Nichimen<br />
Corp.<br />
Auditor, UNITIKA, Ltd.<br />
External Director, MAEDA CORP.<br />
Board of Directors<br />
(3 out of 5 are external)<br />
Elect/oversee<br />
Executive Officers<br />
(Executive Committee)<br />
CEO<br />
in Japan, <strong>UNIQLO</strong>’s overseas development, growth strategies<br />
for Global Brand operations, making CABIN a wholly owned<br />
subsidiary, a bid for the acquisition of Barney’s New York,<br />
strategies for the footwear business, improvements in internal<br />
controls, and compensation for directors.<br />
Audit Committee to Oversee Management<br />
The role of the auditors is to check the compliance of the<br />
Board of Directors in conducting their duties and the implementation<br />
of internal controls. The auditors participate in<br />
meetings of the Board and oversee the performance of directors.<br />
In addition, the auditors attend the meetings of the<br />
Personnel Committee, the CSR Committee, the Risk<br />
Management Committee, the Disclosure Committee, and<br />
other committees to observe whether business activities are<br />
being conducted in compliance with laws and regulations as<br />
well as whether internal controls are in place.<br />
Report<br />
Toru Murayama (53)<br />
External Director<br />
Appointed in 2007<br />
Director & Chairman, Accenture<br />
Japan Ltd.<br />
Visiting Professor, Waseda<br />
University<br />
Human Resources<br />
Committee<br />
CSR Committee<br />
Risk Management<br />
Committee<br />
Disclosure Committee<br />
Nobumichi Hattori (50)<br />
External Director<br />
Appointed in 2005<br />
Visiting Professor, Hitotsubashi<br />
University<br />
External Director, Miraca<br />
Holdings Inc.<br />
(As of December 31, 2007)<br />
<strong>UNIQLO</strong> Co., Ltd.<br />
Code of Conduct<br />
Committee<br />
Business Ethics<br />
Committee
<strong>UNIQLO</strong> <strong>Operations</strong><br />
Fashionable and high-quality clothes that anyone can wear anywhere, any time – that’s what <strong>UNIQLO</strong> is<br />
all about. Our global operating systems weave together all processes from product design to final<br />
sales, including global R&D, procurement of world-class quality materials, production focused in China,<br />
and the operation of 790 stores around the globe. This seamless system allows <strong>UNIQLO</strong> to consistently<br />
offer its customers high-quality products at reasonable prices.<br />
<strong>UNIQLO</strong> <strong>Operations</strong><br />
Japan Apparel<br />
<strong>Operations</strong><br />
Global Brand <strong>Operations</strong><br />
<strong>UNIQLO</strong> Japan<br />
� <strong>UNIQLO</strong> CO., LTD.<br />
<strong>UNIQLO</strong> International<br />
� <strong>UNIQLO</strong>(U.K.)LTD.<br />
� FAST RETAILING(CHINA)TRADING<br />
CO., LTD.<br />
� <strong>UNIQLO</strong> USA, Inc.<br />
� FRL Korea Co., Ltd.<br />
� <strong>UNIQLO</strong> HONG KONG, LIMITED<br />
� <strong>UNIQLO</strong> FRANCE S.A.S.<br />
� CABIN CO., LTD.<br />
� G.U. CO., LTD.<br />
� ONEZONE CORPORATION<br />
� VIEWCOMPANY CO.,LTD.<br />
(Listed on JASDAQ Securities Exchange,<br />
equity-method affiliate)<br />
� Créations Nelson S.A.S.<br />
� PETIT VEHICULE S.A.S.<br />
� LINK THEORY HOLDINGS CO.,LTD.<br />
(Listed on TSE Mothers, equity-method<br />
affiliate)<br />
FAST RETAILING ANNUAL REPORT 2007 11
<strong>UNIQLO</strong> Japan <strong>Operations</strong><br />
To a New Stage: “Clothes that<br />
Make News”<br />
Most of our customers already have plenty of clothes. For them<br />
to purchase new clothes, there must be some new value<br />
added in design and/or function; we could call them “clothes<br />
with some news value.” To communicate the true value of our<br />
products to customers, we have to change all aspects of the<br />
shopping experience, including store design, the sales floor,<br />
lineup of products, and our service.<br />
Our large-format store strategy is part of this change and a Naoki Otoma<br />
process for taking <strong>UNIQLO</strong> to a new stage. In our large-format Senior Vice President and COO, <strong>UNIQLO</strong> CO., LTD.<br />
stores, it is important for us to raise the skills of each staff member to provide customer services that enhance the display<br />
and raise the level of customer satisfaction. We aim to communicate the features of our products, offer new products<br />
each season, and help our customers make their daily lives more comfortable. The growth driver for <strong>UNIQLO</strong> is to<br />
continue to offer that something new that customers are looking for.<br />
Large-Format Store Strategy on Track<br />
In fiscal 2007, consumer spending was sluggish while<br />
competition grew more intense. With the warmest winter<br />
on record and unseasonable spring and summer weather,<br />
<strong>UNIQLO</strong> Japan experienced a profit decline.<br />
To continue to grow in this market environment, there<br />
are limitations on the strategy we have implemented thus<br />
far of selling basic apparel items through standard-format<br />
stores in the suburbs with between 700 square meters<br />
and 800 square meters of sales floor space. That is why<br />
<strong>UNIQLO</strong> has positioned large-format stores as its growth<br />
driver.<br />
Under this large-format strategy, <strong>UNIQLO</strong> is opening<br />
stores in different types of locations, including urban street<br />
sides, suburban shopping centers, commercial facilities,<br />
and roadsides. At the end of August 2007, we had 28<br />
large-format stores, and, in fiscal 2008, we are picking up<br />
the pace of openings of these large-format stores. In fiscal<br />
2007, we opened megastores with about 3,300 square<br />
meters of sales floor space in Kobe’s Harborland and in<br />
Tokyo’s Setagaya Chitosedai district. Both of these have<br />
drawn strong customer interest.<br />
Looking ahead, we will be working to increase the efficiency<br />
of these stores by optimizing the right lineup of<br />
products to take the best advantage of the strengths of<br />
these larger stores, while standardizing our customer<br />
service and store management.<br />
12<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Growth through Responding to Women’s Needs<br />
Women’s apparel accounts for about 70% of the sales of<br />
the fashion apparel industry as a whole, but women’s<br />
items account for only about 40% of <strong>UNIQLO</strong>’s sales. We<br />
believe <strong>UNIQLO</strong> has considerable potential to increase<br />
sales of women’s clothing and look to higher growth in<br />
sales by responding to women’s apparel needs.<br />
In fiscal 2007, we scored with skinny jeans, which<br />
became a great success, and were able to expand our<br />
share in the women’s jeans market. Customers who<br />
bought skinny jeans are increasingly coming back to<br />
<strong>UNIQLO</strong> to buy another pair of jeans. We want to take<br />
advantage of the visits of new customers to our stores by<br />
expanding the lineup of new kinds of products that are<br />
more fashionable and not just offering basic items.<br />
Under our large-format store strategy, we have more<br />
sales floor space and can put more emphasis on offering<br />
coordinated items through improved visual merchandising.<br />
We will display new and attractive women’s apparel<br />
items in ways that are easy for customers to view and<br />
purchase. In large-format stores, we can display a wider<br />
range of goods and offer customers a much more enjoyable<br />
shopping experience.
<strong>UNIQLO</strong> Setagaya Chitosedai store<br />
FAST RETAILING ANNUAL REPORT 2007 13
<strong>UNIQLO</strong> International <strong>Operations</strong><br />
Advancing to Win<br />
in the World’s Fashion Capital<br />
<strong>UNIQLO</strong> products are world class qualitywise. What they need<br />
next is just brand power. When the <strong>UNIQLO</strong> brand becomes<br />
widely known around the world, I believe there is a good<br />
chance of expanding our share of world markets.<br />
In November 2007, we opened a global flagship store, the<br />
311 Oxford Street store, with sales floor space of about 2,300<br />
square meters, located on London’s Oxford Street. At the<br />
same time, we opened another store, the 170 Oxford Street<br />
Masayuki Nagatake<br />
store, with about 1,300 square meters of sales floor space. We President, <strong>UNIQLO</strong>(U.K.)LTD.<br />
chose these locations because this area is the fashion capital for casual wear, where the world’s leading brands compete<br />
for customer attention. By joining the lineup of fashion brands in Europe’s largest shopping area, we aim to increase the<br />
awareness of the <strong>UNIQLO</strong> brand and raise its appeal, its presentation, and its attractiveness. Once anyone tries on<br />
<strong>UNIQLO</strong> clothes, they will understand their value. Making our flagship stores in Europe a success after succeeding with<br />
our U.S. flagship store will open the way for <strong>UNIQLO</strong> to become No.1 in the world in the apparel industry.<br />
Growth in International <strong>Operations</strong> Accelerates<br />
The world apparel market is said to be about ¥100 trillion<br />
in size annually, but <strong>UNIQLO</strong>’s share at present is only<br />
0.4%. Even though the world market is becoming more<br />
competitive, we believe that it is an attractive stage for our<br />
business, with considerable growth potential.<br />
The lesson we have learned from our entry into overseas<br />
markets, which began with the opening of a store in<br />
London in September 2001, is that “the basis of brand<br />
awareness is the store.” That is why we are confident that<br />
the most effective strategy is the opening of global flagship<br />
stores in major countries.<br />
At present, <strong>UNIQLO</strong> is developing its overseas activities<br />
in the United Kingdom; the United States; mainland China,<br />
including Hong Kong; Korea; and France. In fiscal 2007,<br />
<strong>UNIQLO</strong>’s overseas sales totaled ¥16.9 billion, about<br />
twice the ¥8.7 billion reported in fiscal 2006.<br />
The stages of growth and development vary from country<br />
to country and strategies also differ. However, by<br />
drawing on the know-how accumulated thus far, we are<br />
working to optimize our operations. Going forward, we<br />
plan to accelerate the opening of <strong>UNIQLO</strong> stores overseas<br />
and consolidate our foothold as a global brand.<br />
14<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Opening Global Flagship Stores<br />
We opened our first flagship store in November 2006 in<br />
New York’s Soho district, where the world’s top brands<br />
have gathered to display their fashions. With sales floor<br />
space of about 3,300 square meters, the Soho New York<br />
store has raised the awareness of the <strong>UNIQLO</strong> brand.<br />
In November 2007, we opened another global flagship<br />
store in London’s Oxford Street area, which is one of<br />
Europe’s leading shopping areas. Then in December<br />
2007, we opened our first store in France, a concept<br />
shop, situated in La Defense, outer Paris. We are also<br />
making plans to open a global flagship store in the center<br />
of Paris. These stores have the role of communicating<br />
<strong>UNIQLO</strong>’s top-level creativity to the fashion centers of the<br />
Americas and Europe and to the rest of the world.<br />
In Asia, where demand for apparel is growing at an<br />
impressive pace, we opened our first large-format store,<br />
with about 2,300 square meters of sales floor space, successfully<br />
in China in December 2006—the Shanghai<br />
Zengda store. In fiscal 2008, we have plans for further<br />
store openings, including a large-format store in Beijing<br />
and new stores in Hong Kong.<br />
In Korea, we opened a large-format store, with 2,300<br />
square meters of sales floor space in the Myongdong district<br />
of Seoul in December 2007, and we are moving forward<br />
with plans for opening additional stores in Seoul.
<strong>UNIQLO</strong> 311 Oxford Street store, London<br />
FAST RETAILING ANNUAL REPORT 2007 15
<strong>UNIQLO</strong>’s Business Model<br />
<strong>UNIQLO</strong> is an SPA (Specialty Store Retailer of Private Label Apparel), meaning its activities are fully integrated from<br />
design through production and retailing. To offer high-quality products at low prices, <strong>UNIQLO</strong>, backed by its sales<br />
network of approximately 790 stores worldwide, controls all stages of the supply process—from product design to<br />
the procurement of materials, quality control, inventory adjustments, and other aspects—and insists on low-cost<br />
management. In addition, <strong>UNIQLO</strong> takes 100% of the raw materials and inventory risks. This is exactly the reason<br />
why <strong>UNIQLO</strong> can differentiate itself from competitors and generate profits.<br />
16<br />
Store Development and Design<br />
The store development and design team<br />
conducts simulations of sales and profitability<br />
and decides on store locations.<br />
Stores are designed to suit various retail<br />
venues and floor space.<br />
Men’s<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Head Office<br />
The merchandising, R&D, and marketing<br />
departments work together to prepare<br />
numerical plans, develop product mixes<br />
to match the concept for the season,<br />
and adjust production according to sales<br />
volume.<br />
Product Planning (Merchandising) and Marketing (Promotion)<br />
Women’s<br />
Kids’<br />
R&D Center<br />
<strong>UNIQLO</strong>’s R&D Center has operations in Tokyo, New York, Paris, and Milan and researches world trends in fashion and lifestyles.<br />
Based on this information, concepts for each season are decided at meetings held jointly with representatives of <strong>UNIQLO</strong>’s<br />
merchandising and marketing departments. Based on these concepts, the R&D Center creates designs simultaneously in these<br />
four cities, then makes its selection of products from samples to structure and arranges product lineups for individual countries.<br />
Research<br />
R&D Center<br />
Concept Creation Design Coordination<br />
Sales Planning and Production Inventory Control<br />
Accessories<br />
Sales<br />
Inner wear<br />
Based on the concept for the season, sales plans and product mixes are prepared by<br />
product categories (men’s, women’s, kids’, accessories, and inner wear). The marketing<br />
department then advertises campaign products using flyers and TV commercials.<br />
The inventory control team, working with<br />
the merchandising, sales, and production<br />
departments, monitors sales activity and<br />
inventory levels to minimize inventory risk.<br />
Materials Planning and Procurement<br />
The materials planning team negotiates<br />
directly with leading materials manufacturers<br />
and procures top-quality materials<br />
from around the world. In addition, in<br />
cooperation with materials manufacturers,<br />
the team works to develop new fabrics.<br />
<strong>UNIQLO</strong> calls on about 70 partner factories<br />
located in China and the rest of Asia for production<br />
and provides them with proactive<br />
technological support. <strong>UNIQLO</strong> has formed a<br />
team of specialists called takumis, each with<br />
experience of 30 years or more in Japan’s textile<br />
industry who are seconded to these factories.<br />
The takumis are closely involved in all<br />
aspects of the production processes from<br />
inspection of yarn to the shipment of final<br />
goods, and they keep a sharp eye on a wide<br />
range of things, including materials and yarn,<br />
weave patterns, dyeing, sewing, texture, finish,<br />
and safety issues.<br />
<strong>UNIQLO</strong>’s products are manufactured in<br />
large lots of about one million at partner factories.<br />
To ensure level quality for such a large<br />
volume of products, problem-solving capabilities<br />
backed by experience are indispensable.<br />
That is where the skills of the takumis are<br />
making a major contribution. For example, in<br />
the dyeing process, to ensure that colors produced<br />
by tens of vats of dye, with a capacity<br />
of one ton each, are uniform, tasks do not<br />
stop at the confirmation of the process but<br />
must also extend to checking on the humidity<br />
and setting conditions accurately.<br />
At present, about 90% of <strong>UNIQLO</strong> products<br />
are manufactured in China. As <strong>UNIQLO</strong>’s retail<br />
network is extended around the world, the<br />
production network is being extended to other<br />
countries in Asia, including Vietnam. Going<br />
forward, <strong>UNIQLO</strong> will insist on quality<br />
management in its world-class manufacturing<br />
systems.<br />
(Photographs: partner factories.)<br />
Quality and Production<br />
Controls<br />
At <strong>UNIQLO</strong>’s Shanghai office,<br />
about 120 members of staff are<br />
responsible for quality and<br />
production supervision. They<br />
maintain close contact between<br />
the partner factories and the<br />
<strong>UNIQLO</strong> Head Office to confirm<br />
progress toward the completion<br />
of production runs as well as<br />
identifying and solving problems.<br />
The staff visits partner factories<br />
three to four days each week to<br />
conduct quality and safety<br />
checks and confirm manufacturing<br />
specifications. As a result of<br />
these initiatives, <strong>UNIQLO</strong> aims to<br />
make improvements in product<br />
quality and production process<br />
yields.<br />
* For more about quality and safety control, please see page 39.<br />
Spinning<br />
The spinning begins with the unraveling of raw<br />
yarn materials. To ensure stable quality, cotton<br />
from several areas is blended.<br />
More than 10,000 cones for winding yarn must<br />
have the same degree of tension to ensure that<br />
yarn production is uniform.<br />
At weekly reporting sessions, <strong>UNIQLO</strong> staff identifies problems<br />
related to materials and issues arising in the sewing and processing<br />
stages, and supervisors confirm the deadlines for taking<br />
action to address these issues.<br />
Weaving<br />
Although weaving processes are automated,<br />
texture and quality are measured and assessed<br />
by experienced masters.<br />
Plant personnel check for flaws in the woven<br />
cloth using a translucent light board.<br />
FAST RETAILING ANNUAL REPORT 2007 17<br />
Production<br />
Shintaro Shiba, Production Control<br />
<strong>UNIQLO</strong> representatives conduct intense<br />
discussions with production partners to<br />
maintain quality.<br />
Dyeing<br />
Strips of cloth joined together are dyed as they<br />
pass through the liquid flow dyeing machine.<br />
Dyeing solutions prepared by computer are<br />
adjusted through artisans’ eyes to detect subtle<br />
shades.<br />
<strong>UNIQLO</strong>’s Takumi Team<br />
Since 2000, <strong>UNIQLO</strong>’s takumi<br />
team, comprising veteran personnel<br />
trained and seasoned in<br />
Japan’s textile industry, plays a<br />
substantive role in providing<br />
technical support to partner<br />
factories. These takumis have a<br />
diverse range of backgrounds<br />
and skills, and each of them<br />
plays a role in supporting the<br />
quality of <strong>UNIQLO</strong> products<br />
while transmitting his knowledge<br />
gained in Japan’s once<br />
highly acclaimed apparel industry<br />
to the next generations.<br />
Processing<br />
Gradations and detailed patterns are finished by<br />
hand carefully to create a beautiful finished product.<br />
Large-scale equipment finishes multi-color prints<br />
flawlessly and is capable of processing large lots.<br />
Tadamichi Tokuoka<br />
“The basics are extremely<br />
important in nurturing craftsmanship.<br />
There are still many<br />
things that even I do not know.”<br />
A specialist in dyeing woven<br />
materials, Tokuoka worked as a<br />
dyer for more than 40 years,<br />
matching colors and performing<br />
finishing in the textile industry.<br />
Michio Ota<br />
“Becoming friends and talking<br />
to them on the same level are<br />
essential. Another essential is to<br />
show successful cases as fast<br />
as you can.”<br />
Ota is a takumi specializing in<br />
quality control. He has worked<br />
in the dyeing field since the<br />
1950s, when Kyoto’s dyeing<br />
industry was at its height.<br />
Sewing and Finishing<br />
The sewing process begins with cutting and<br />
machine sewing. Sewing requires attention to<br />
detail and patience.<br />
Ironing and packing are performed with great<br />
care. Quality and safety inspections are conducted<br />
several times.<br />
Hidenori Konishi<br />
I can see our processes getting<br />
better and better right before my<br />
eyes. Nothing could make me<br />
happier!”<br />
In charge of the sewing processes,<br />
from cutting to inspection,<br />
Konishi has earned a reputation<br />
for technical guidance with an<br />
eye for detail.<br />
FAST RETAILING ANNUAL REPORT 2007 18
Global R&D<br />
Creating Clothes<br />
with Style<br />
To this day, there are still situations where clothes<br />
are not something we put on but something that<br />
puts us on. <strong>UNIQLO</strong>’s role is to offer clothes customers<br />
want to wear now in the way they feel<br />
comfortable. In other words, we want to keep<br />
Yukihiro Katsuta<br />
offering clothes that all our customers feel they<br />
Vice President, <strong>UNIQLO</strong> CO., LTD.<br />
must have in their wardrobes.<br />
In the jeans market, <strong>UNIQLO</strong> is becoming an established brand. Our goal is to have <strong>UNIQLO</strong> become an<br />
established presence in each apparel category. When customers think of cashmere, they think of <strong>UNIQLO</strong>,<br />
and the same for T-shirts.<br />
I have asked our R&D staff members to develop clothing that takes account of coordination and styling. Our<br />
apparel offerings now are predominately items that look attractive when worn, rather than just being appealing<br />
when displayed in stores. I believe that, when all of our stores are able to suggest exactly the right styling,<br />
<strong>UNIQLO</strong>’s apparel will shine even brighter.<br />
Developing Clothes through Our Global R&D<br />
There was a time when fashion trends began with<br />
European collections originating mainly in Paris and<br />
Milan and then gradually spread to the Americas,<br />
Japan, and the rest of Asia. However, now, along<br />
with the globalization of apparel markets, fashion<br />
trends move around the world simultaneously.<br />
At <strong>UNIQLO</strong>, we inaugurated a global R&D Center in<br />
autumn 2005 that links the key fashion cities of<br />
Tokyo, New York, Paris, and Milan. At these four<br />
fashion centers, we identify worldwide trends and<br />
latent needs, decide on season concepts, and then<br />
create designs simultaneously in each center.<br />
Selecting from these designs, we structure and<br />
arrange product lineups suited to different markets,<br />
and, beginning with the fall and winter seasons of<br />
2006, we began to offer in earnest apparel that was<br />
created through this very global R&D.<br />
One of the representative hit products generated by<br />
this approach is skinny jeans that closely fit the wearer’s<br />
leg line. Based on this idea, provided by our global<br />
R&D people, we went to great lengths to create the<br />
right silhouette and carefully select the best materials.<br />
These efforts were rewarded, because after these<br />
skinny jeans went on the market, <strong>UNIQLO</strong> sold more<br />
than four million pairs in fiscal 2007, and skinny jeans<br />
became associated with <strong>UNIQLO</strong> in our customers’<br />
minds.<br />
Recognizing <strong>UNIQLO</strong>’S Core Competency<br />
As we worked to develop our international operations,<br />
we recognized that <strong>UNIQLO</strong>’s strengths lie in creating<br />
basic casual clothes. Along with the development of<br />
products linked to trends and latent customer needs,<br />
it is necessary each season to evolve our basic items,<br />
which are <strong>UNIQLO</strong>’s core competency. Even with<br />
standard items, we insist uncompromisingly on<br />
reviewing and evolving materials and details to<br />
breathe new life into each and every item.<br />
In addition, to continue to grow in Japan and<br />
establish a brand that appeals to customers around<br />
the world, standard items are increasingly necessary<br />
in each category—including cut-and-sewn, outerwear,<br />
knit, and inner wear—to drive sales.<br />
That is why developing merchandise that customers<br />
can only find at <strong>UNIQLO</strong> is important. Thus<br />
far, we have drawn on our strengths in materials to<br />
develop our fleece, “Heat-Tech”, and other original<br />
products. In the case of “Heat-Tech” inner wear, we<br />
are working with TORAY INDUSTRIES, INC., our<br />
strategic partner, and are now marketing our “Heat-<br />
Tech Moist” series, which, in addition to having high<br />
heat retention properties and stretchability, has<br />
improved moisture-retaining properties.<br />
FAST RETAILING ANNUAL REPORT 2007 19<br />
<strong>UNIQLO</strong>’s Business Model<br />
20<br />
<strong>UNIQLO</strong> offers merchandise at special prices 24 hours a day to<br />
customers in Japan via the <strong>UNIQLO</strong> Online Store.<br />
http://store.uniqlo.com/jp/<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Sales<br />
Japan<br />
<strong>UNIQLO</strong> has developed a network of about 750 stores, mainly in roadside<br />
locations and inside shopping centers. Today, <strong>UNIQLO</strong> is moving forward<br />
with the opening of stores optimally suited to their respective locations, ranging<br />
from large-format stores, with about 1,600 square meters of sales floor<br />
space, to standard stores, with about 700 to 800 square meters of space.<br />
To continue to offer apparel that can be worn “anytime, anywhere, and<br />
by anyone,” <strong>UNIQLO</strong> manages its product composition and volume with<br />
the objective of having the optimal number of products in terms of colors<br />
and sizes.<br />
<strong>UNIQLO</strong> conducts campaigns aimed at selling products suited to the season,<br />
such as cashmere and fleece. As part of these campaigns, <strong>UNIQLO</strong><br />
distributes flyers on weekends and aims to attract customers by discounting<br />
featured products for limited periods. These limited period discounts are<br />
aimed at sales promotion, and after the end of the promotional period, prices<br />
go back to their original levels.<br />
<strong>UNIQLO</strong>’s principal expenses include wages, rent, and advertising costs.<br />
Wages consist mainly of salaries paid to store personnel, but, as a result of<br />
the standardization of work tasks in all stores, these personnel expenditures<br />
are used efficiently. The ratio of rent to sales is relatively low because about<br />
60% of <strong>UNIQLO</strong> stores in Japan are situated on suburban roadside locations.<br />
Also, when setting up outlets in shopping centers, <strong>UNIQLO</strong> prepares<br />
simulations in advance and works to minimize rental costs. The principal<br />
forms of advertising are the distribution of flyers and TV commercials.<br />
International<br />
170 Oxford Street store, London The Soho New York store The Lotte Young Plaza, Seoul<br />
Middle Huaihai Road store, Shanghai<br />
<strong>UNIQLO</strong> began its entry into retail markets overseas in<br />
September 2001 with the opening of stores in London. As of<br />
August 2007, <strong>UNIQLO</strong> had 11 stores in the United Kingdom,<br />
13 stores in China (including 4 in Hong Kong), 1 store in the<br />
United States, and 14 in Korea. After opening a global flagship<br />
store in New York’s Soho district in November 2006,<br />
<strong>UNIQLO</strong> opened another global flagship store on London’s<br />
Oxford Street. We believe that the Chinese and Korean markets<br />
also have enormous growth potential and are moving forward<br />
aggressively with plans to open more stores in those<br />
markets, including large-format stores.<br />
Online Store Customer Service<br />
The Miramar Shopping Center store,<br />
Hong Kong<br />
We forward the opinions and requests that come from customers<br />
via telephone, postcard, and e-mail to the proper<br />
departments and reflect these in improvements in products,<br />
stores, and services.<br />
FAST RETAILING ANNUAL REPORT 2007 21
<strong>UNIQLO</strong> Topics<br />
<strong>UNIQLO</strong> to Offer “What Everyone Always Wanted”<br />
<strong>UNIQLO</strong> is marking the fifth year since introducing its<br />
Cashmere Series. For the autumn and winter seasons<br />
of 2007, <strong>UNIQLO</strong> added some new touches to the<br />
luxury feel of its cashmere materials by focusing the<br />
world’s creative talent to offer an even more refined<br />
cashmere style. <strong>UNIQLO</strong> brought together the full<br />
forces of its global R&D Center designers, then added<br />
items created in collaboration with some of the<br />
world’s leading designers, including Adam Jones,<br />
Lutz and Patmos, and Keita Maruyama, to fully renew<br />
the image of the <strong>UNIQLO</strong> cashmere lineup—and create<br />
a buzz heard around the world.<br />
22<br />
Topic 1: World Designers Meet 100% Cashmere<br />
Focusing the World’s Creative Talent on <strong>UNIQLO</strong> Cashmere<br />
Topic 2: HOTELS HOMES<br />
A New Brand to Satisfy the Desire for Hotel-Style Amenity at Home<br />
HOTELS HOMES is a new brand of home products,<br />
including towels, bedsheets, and shampoo, that only<br />
<strong>UNIQLO</strong> could create because of its unyielding insistence<br />
on quality in materials. The theme of the new<br />
brand series is “offering hotel quality,” and the<br />
HOTELS HOMES ensemble features body-care items<br />
made from natural oils without any additives, bedsheets<br />
and towels soft and gentle to the touch created<br />
from the best-quality materials, and other<br />
amenities. As we offer items essential for daily life, we<br />
are looking forward to growth of the new brand line.<br />
Topic 3: stylish white<br />
<strong>UNIQLO</strong> and TORAY Develop Pants That Captivate Women’s Hearts<br />
Women often say they want “summer bottoms that<br />
are comfortable but also discreetly opaque.” <strong>UNIQLO</strong><br />
has responded by creating its “stylish white” line<br />
of women’s pants. The stylish white bottoms, codeveloped<br />
with TORAY in spring 2007 to respond to<br />
womens’ needs, are made of polyester yarn infused<br />
with a high-density ceramic material, then woven into<br />
fabric using a fine crimping process that yields a<br />
material that is virtually opaque and difficult to see<br />
through from the outside.<br />
FAST RETAILING ANNUAL REPORT 2007
Japan Apparel <strong>Operations</strong><br />
Our Japan Apparel operations include CABIN, a retailer of women’s apparel, G.U., a low-priced casual<br />
clothing retailer, and ONEZONE, a shoe retailer. We continue to tackle new markets, making use of the<br />
know-how <strong>UNIQLO</strong> has amassed as a Specialty Store Retailer of Private Label Apparel (SPA).<br />
<strong>UNIQLO</strong> <strong>Operations</strong><br />
Japan Apparel<br />
<strong>Operations</strong><br />
Global Brand <strong>Operations</strong><br />
<strong>UNIQLO</strong> Japan<br />
� <strong>UNIQLO</strong> CO., LTD.<br />
<strong>UNIQLO</strong> International<br />
� <strong>UNIQLO</strong>(U.K.)LTD.<br />
� FAST RETAILING(CHINA)TRADING<br />
CO., LTD.<br />
� <strong>UNIQLO</strong> USA, Inc.<br />
� FRL Korea Co., Ltd.<br />
� <strong>UNIQLO</strong> HONG KONG, LIMITED<br />
� <strong>UNIQLO</strong> FRANCE S.A.S.<br />
� CABIN CO., LTD.<br />
� G.U. CO., LTD.<br />
� ONEZONE CORPORATION<br />
� VIEWCOMPANY CO.,LTD.<br />
(Listed on JASDAQ Securities Exchange,<br />
equity-method affiliate)<br />
� Créations Nelson S.A.S.<br />
� PETIT VEHICULE S.A.S.<br />
� LINK THEORY HOLDINGS CO.,LTD.<br />
(Listed on TSE Mothers, equity-method<br />
affiliate)<br />
FAST RETAILING ANNUAL REPORT 2007<br />
23
Japan Apparel <strong>Operations</strong><br />
CABIN Co., Ltd.<br />
http://www.cabin.co.jp/<br />
Working to strengthen operations as a wholly owned Group subsidiary<br />
CABIN’s brands—ZAZIE, Real Riche, and enraciné—make it popular among a broad spectrum of<br />
women. The ZAZIE brand brings elegance to everyday fashions, the Real Riche brand targets working<br />
women, and the enraciné brand offers casual wear for relaxed settings.<br />
History<br />
Originally established in 1971, CABIN pioneered the SPA<br />
approach in the women’s apparel business in Japan and<br />
grew rapidly in the 1970s, with annual sales reaching ¥65.7<br />
billion in the fiscal year ended February 1992. While annual<br />
sales have trended downward since then, in fiscal 2007,<br />
CABIN recorded sales of ¥21.7 billion and drew a wide array<br />
of women to the 211 stores it operates in Japan.<br />
In August 2007, FAST RETAILING raised its ownership<br />
stake in CABIN and made the retailer a wholly owned subsidiary.<br />
While drawing on the best of CABIN’s intrinsic<br />
strengths as an SPA pioneer in women’s apparel, FAST<br />
RETAILING will also actively apply its management resources<br />
and know-how to further strengthen CABIN’s operating foundation.<br />
24<br />
Yokohama LaLaport enraciné store<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Growth Strategy<br />
ZAZIE Kurashiki AEON Mall store<br />
Products<br />
The ZAZIE brand brings elegance to everyday fashions. The<br />
Real Riche brand, targeted at independent-minded working<br />
women, is a stylish apparel line with pieces suitable for workplace<br />
settings as well as for holidays and weekends. Its<br />
autumn/winter 2007 collection features simple but stylish<br />
items, centering on fresh takes on the layered knit basics;<br />
glamorous, colorful coats; authentic trench coats with chic<br />
details; and smart-looking modern classics in black. This collection<br />
offers businesswomen items that are feminine but also<br />
practical. Taking its inspiration from natural French fashion,<br />
the enraciné line of casual wear is comfortable enough to<br />
wear at home and other relaxed settings and comes in fun<br />
and trendy styles that steer clear of the cutting edge.<br />
We have launched programs to rebuild CABIN’s mainstay brands—ZAZIE,<br />
Real Riche, enraciné, and ê.a.p. The basic concept behind each brand has<br />
been clearly spelled out, and we are working to strengthen aspects of<br />
product development, such as design and the selection of fabrics and<br />
other materials. We are also sending people from our domestic <strong>UNIQLO</strong><br />
operations with expertise in marketing, merchandising, and store operations<br />
to help CABIN make changes that will further solidify its business foundation.<br />
CABIN operated 211 stores in Japan as of the end of August 2007.
Real Riche<br />
FAST RETAILING ANNUAL REPORT 2007 25
Japan Apparel <strong>Operations</strong><br />
G.U. CO., LTD.<br />
http://www.gu-japan.com/<br />
Good quality at accessible prices—fun casual wear that offers freedom of choice<br />
With an extensive range of variations at accessible prices, the g.u. brand of casual wear for the entire<br />
family offers everyone greater freedom to wear what he or she wants.<br />
History<br />
G.U. was established in March 2006 as a wholly owned subsidiary<br />
of FAST RETAILING and opened the first g.u. store<br />
inside the Daiei Minami Gyotoku store in October 2006. After<br />
opening 25 stores in the autumn/winter 2006 season, the<br />
subsidiary opened another 25 stores in the spring/summer<br />
2007 season, for a total of 50 stores in operation. Our aim is<br />
to rapidly boost G.U.’s scale as a member of the FAST<br />
RETAILING Group by applying the experience gained through<br />
our <strong>UNIQLO</strong> operations, including know-how in store operations,<br />
product development, store development, and inventory<br />
control.<br />
26<br />
The Kobe Harborland Bee’s Kiss g.u. Store<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Products<br />
Targeted mainly at families, the g.u. line appeals with lowpriced<br />
products to a broad array of consumers. New products<br />
are introduced weekly with a wide-ranging selection,<br />
from trendy items for those looking for the latest styles that<br />
are easy to mix and match in stylish combinations as well as<br />
loose-fitting clothing that creates a relaxed silhouette.<br />
Product development efforts will focus on women’s fashions.<br />
For the 2007 autumn/winter season, we focused on leg<br />
fashions, drumming up interest with our new collection of g.u.<br />
leggings and tights 100.<br />
Growth Strategy<br />
G.U. has developed a network of 50 directly-managed run stores, most of<br />
which are located in the Kanto and Kansai metropolitan regions, as of<br />
August 2007. Plans in 2008 call for the development of store formats by<br />
opening stores in various venues and locations, such as shopping centers<br />
and roadside sites. Our aim in developing a product lineup that is low<br />
priced and fashionable is to ensure g.u. stores remain a popular destination<br />
for our customers.
Japan Apparel <strong>Operations</strong><br />
ONEZONE CORPORATION<br />
http://www.onezone.jp/<br />
ONEZONE to create a new shoe retailing chain<br />
With footwear for fun, relaxed lifestyles, FOOTPARK offers reasonably priced shoes of quality and utility<br />
for families.<br />
History<br />
ONEZONE’s principal business is FOOTPARK, a specialty<br />
shoe retailing chain with a total of 330 stores throughout<br />
Japan. FOOTPARK stores stock an extensive range of<br />
footwear basics that emphasize performance and comfort but<br />
also feature fashionable touches.<br />
ONEZONE became a wholly owned subsidiary of FAST<br />
RETAILING in March 2005. With the Group’s full support,<br />
ONEZONE has moved forward since then with a reform program<br />
that encompasses everything from product planning<br />
and store strategies to operations and management systems.<br />
FOOTPARK Kichijoji Sunroad Store<br />
Growth Strategy<br />
Products<br />
ONEZONE has chiefly sold shoes procured from footwear<br />
manufacturers, but from spring 2007 it began to increase the<br />
number of original footwear products made from selected<br />
materials and designs. Among them, women’s flats and<br />
boots have become best-sellers at FOOTPARK stores as<br />
they appeal to women seeking comfortable footwear made<br />
from quality materials that come in up-to-date designs and<br />
colors. Another commercial success for FOOTPARK is a line<br />
of comfortable sport shoes it developed with uppers that<br />
repel water and inner linings made from a new moisture-wicking<br />
fabric called “Air Breath.” ONEZONE seeks to offer new<br />
value in shoes going forward as its product development<br />
efforts add to its series of original footwear.<br />
With consumers shifting their shopping to large new commercial hubs,<br />
ONEZONE has started a reassessment of its network of roadside stores<br />
situated outside of major shopping districts. ONEZONE aims to improve the<br />
locations of its FOOTPARK stores by taking such steps as opening stores<br />
together with the FAST RETAILING Group. The FOOTPARK Kichijoji<br />
Sunroad Store, on a busy street in Tokyo opened in October 2007, has<br />
reported a robust sales performance. In product development, ONEZONE<br />
will step up efforts aimed at increasing its collection of original products.<br />
FAST RETAILING ANNUAL REPORT 2007 27
Japan Apparel <strong>Operations</strong><br />
VIEWCOMPANY CO.,LTD.<br />
http://www.viewcompany.net/<br />
Nationwide retailer specializing in women’s footwear<br />
The [vju:] store appeals to women from teens to those in their 30s and 40s with affordable prices; the<br />
COO ICI store targets women in their early 20s with an extensive selection.<br />
History<br />
Founded in 1961, VIEWCOMPANY listed on JASDAQ (stock<br />
code: 3033) in April 2006, and in October of the same year<br />
formed an operating and capital alliance with the FAST<br />
RETAILING Group to strengthen its store operations and<br />
enhance its development of private-label products. The mainstay<br />
brand [vju:] stores chiefly stock an assortment of shoes<br />
targeting women in their teens through to their 30s and 40s.<br />
VIEWCOMPANY’s nationwide network of 103 stores includes<br />
COO ICI stores, which are premised on the concept of creating<br />
a special place suited to whatever scenes women envision,<br />
and SHOES WORLD stores, which carry a broad array<br />
of footwear for families.<br />
28<br />
ICI SISTERS Sakai Store<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Growth Strategy<br />
Products<br />
VIEWCOMPANY stores are popular among a broad range of<br />
consumers thanks to their line of fashionable products at reasonable<br />
prices and the personalized service provided by store<br />
staff. In the fiscal year ended February 2007, natural brown<br />
leather strap Bandar Pumps, which are open and breathable<br />
like sandals but dressy enough for the workplace, sold especially<br />
well among women in their 20s and boosted sales.<br />
Likewise, Resort Sandals were well received by women in the<br />
20s, 30s, and 40s, and contributed to sales. Of our offerings<br />
for the autumn/winter 2008 season, our ankle-high booties<br />
can be worn with miniskirts, jeans, and colorful tights, and<br />
have become a top seller. Another popular item is our Jockey<br />
Boots, which allow wearers to tuck their jeans snuggly into<br />
the boot opening.<br />
VIEWCOMPANY is working to improve its management efficiency by standardizing<br />
store operations, with the aim of building a resilient corporate<br />
structure in the face of mounting competition. Our aims are to provide<br />
customers with a friendly environment through the renovation of existing<br />
stores and increase the ratio of original products matching consumer<br />
needs through the use of market information from FAST RETAILING Group<br />
companies. We consider the fiscal year ending February 2008 to be the<br />
year of our “second founding,” and in that spirit we are pressing ahead with<br />
business reform measures aimed at putting us on a new growth path.
Global Brand <strong>Operations</strong><br />
Our mission in Global Brand operations is to use the financial resources and business base of FAST<br />
RETAILING to nurture new international brands based on excellent concepts. Brands with global potential<br />
that we are developing in Europe, Asia, and the United States include COMPTOIR DES<br />
COTONNIERS, which offers a superb lineup of French casual wear, and lingerie brand PRINCESSE<br />
TAM.TAM.<br />
<strong>UNIQLO</strong> <strong>Operations</strong><br />
Japan Apparel<br />
<strong>Operations</strong><br />
Global Brand <strong>Operations</strong><br />
<strong>UNIQLO</strong> Japan<br />
� <strong>UNIQLO</strong> CO., LTD.<br />
<strong>UNIQLO</strong> International<br />
� <strong>UNIQLO</strong>(U.K.)LTD.<br />
� FAST RETAILING(CHINA)TRADING<br />
CO., LTD.<br />
� <strong>UNIQLO</strong> USA, Inc.<br />
� FRL Korea Co., Ltd.<br />
� <strong>UNIQLO</strong> HONG KONG, LIMITED<br />
� <strong>UNIQLO</strong> FRANCE S.A.S.<br />
� CABIN CO., LTD.<br />
� G.U. CO., LTD.<br />
� ONEZONE CORPORATION<br />
� VIEWCOMPANY CO.,LTD.<br />
(Listed on JASDAQ Securities Exchange,<br />
equity-method affiliate)<br />
� Créations Nelson S.A.S.<br />
� PETIT VEHICULE S.A.S.<br />
� LINK THEORY HOLDINGS CO.,LTD.<br />
(Listed on TSE Mothers, equity-method<br />
affiliate)<br />
FAST RETAILING ANNUAL REPORT 2007<br />
29
Global Brand <strong>Operations</strong><br />
Créations Nelson S.A.S.<br />
http://www.meresetfilles.jp/<br />
Chic French brand COMPTOIR DES COTONNIERS ready to go global<br />
COMPTOIR DES COTONNIERS is the French women’s brand whose creative style and the mother and daughter<br />
campaigns have won over a large public. Each season, real duos from around the world embody the collection image.<br />
History<br />
The saga began in 1995 with the opening of two boutiques in<br />
Paris and Toulouse. The trade name COMPTOIR DES<br />
COTONNIERS referred to the natural fabrics, with a human<br />
dimension of exchange and proximity with the customers.<br />
The brand developed its core values further in 1997, when<br />
the founder realized, dressing the shop window, that mothers<br />
and daughters often go shopping and spend enjoyable time<br />
together. When the COMPTOIR DES COTONNIERS presented<br />
its image embodied by real mothers and daughters, the<br />
concept quickly won a large following in France.<br />
Overseas boutiques were opened, starting with European<br />
cities: first Barcelona, Madrid, and Brussels, then Berlin,<br />
London, Lisbon, and Milan. In the meantime, the brand<br />
established itself in Tokyo and Seoul.<br />
30<br />
COMPTOIR DES COTONNIERS Boutique rue Pavée<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Sophie and her daughter Léca<br />
Products<br />
The collections reflect the image of the brand—authenticity,<br />
naturalness, and femininity. The clothes are designed so that<br />
the most sophisticated trends are reinterpreted to be constantly<br />
flattering.<br />
Its preoccupation with detail and the desire to be different<br />
have also led the brand to develop exclusive prints and fabrics.<br />
Since 2004, COMPTOIR DES COTONNIERS has increased<br />
its offer with not only a children’s collection but also with a lingerie<br />
line and accessories. COMPTOIR DES COTONNIERS,<br />
moreover, offers a selection of Fair Trade products such as<br />
trainers by Veja – a Brazilian brand made in 100% natural<br />
materials by a cooperative of small producers.<br />
Casting sessions are organized in every country where the brand<br />
is present, and are featured on the Website:<br />
www.mothers-and-daughters.com<br />
Growth Strategies<br />
With retail sales amounting to ¥24 billion, COMPTOIR DES COTONNIERS<br />
growth is due both to the increase in scope, or international development,<br />
and to the strong performance of the existing network. While optimizing the<br />
French network of 226 shops, the brand has developed in other European<br />
countries and in Asia, respectively, 59 and 29 points of sales (as of August<br />
31, 2007). Since the first boutique in Tokyo in February 2006, 20 points of<br />
sale have been opened in Japan. The COMPTOIR DES COTONNIERS<br />
brand has recently launched children’s, lingerie, and accessories lines and<br />
will continue to enhance its product offerings for further growth.
INTERVIEW<br />
Creative Director of COMPTOIR DES COTONNIERS<br />
Brigitte Comazzi<br />
Q: What do you think is unique about the<br />
brand COMPTOIR DES COTONNIERS?<br />
The brand is very original because it communicates<br />
with customers by having them identify with real<br />
mothers and daughters. For 10 years, COMPTOIR<br />
DES COTONNIERS has been illustrating the special<br />
rapport between mothers and daughters by selecting<br />
and featuring completely anonymous mother and<br />
daughter pairs, who display their close and easy relationship,<br />
in the brand’s advertising campaigns. We are<br />
the only brand to communicate with real people, not<br />
with stars, nor with celebrities or models. When people<br />
look at our ads, they feel a very close identification<br />
since the link between mothers and daughters is<br />
authentic, human, and universal. I can almost hear<br />
them saying, “Oh, these mothers and daughters are<br />
like us.” Those feelings of proximity and intimacy are<br />
very important for us.<br />
Q: Are there any French or Parisian elements<br />
in the brand? How do you present the brand in<br />
other countries in Europe and Asia?<br />
The Parisian look is natural, feminine, never showing<br />
off – never too much.<br />
With a style that mixes the current trends with a<br />
constant simplicity, our collection embodies the<br />
charm and elegance of the “Parisian” chic for the<br />
contemporary woman. And I think that is what<br />
women from other countries like: the French touch.<br />
Q: Tell us what is particularly great about<br />
COMPTOIR DES COTONNIERS clothes?<br />
The preoccupation with details, refinement, and the<br />
desire to be different leads us to develop exclusive<br />
prints and fabrics. The cuts are sophisticated, finishes<br />
are meticulous, and the style always reflects the latest<br />
trends.<br />
Q: What do you believe were the keys to the<br />
success of the 2007 collections?<br />
The collections were more feminine. The dresses<br />
demonstrated their strengths with new proportions.<br />
We worked on more contemporary silhouettes<br />
introducing, for example, new volume and fullness for<br />
coats and created successful prints. We highlighted<br />
some garments with touches of colors. Some looks<br />
went on also to express new, chic basics.<br />
Q: As a creative director, have you changed<br />
anything?<br />
I brought more feminine, fashionable elements to the<br />
collections and more diversity, with new silhouettes,<br />
fabrics, or color range while building naturally on the<br />
brand’s fashion “code.” The most sophisticated trends<br />
are reinterpreted so as to be constantly in line with our<br />
image.<br />
Q: How do you capture the trends, and where<br />
does your inspiration come from?<br />
You need to look at the customers, at people on the<br />
street, TV, books, cinema, everything. You need to be<br />
very open-minded and curious. We travel a lot to feel<br />
the trend in the United States, Japan, or Europe. We<br />
also have a good relationship within the design team;<br />
we speak a lot, exchanging different points of view.<br />
So, inspiration is everywhere.<br />
FAST RETAILING ANNUAL REPORT 2007 31
Global Brand <strong>Operations</strong><br />
PETIT VEHICULE S.A.S.<br />
httpwww.princessetamtam.com/<br />
PRINCESSE TAM.TAM to offer women lingerie with dreams, spirits and freedom<br />
Stylish and innovative, the French-born lifestyle brand PRINCESSE TAM.TAM cares less for the rules of<br />
the lingerie market than for fashion and creativity. Making a statement in support of free feminity, this<br />
affordable luxury brand aims for the world market.<br />
History<br />
Twenty-two years ago in France, lingerie was either functional<br />
or “sexy,” mostly in knitted fabrics. Madagascar born and<br />
raised, bright colors and perfume of the southern island still in<br />
mind, Loumia and Shama Hiridjee surprised Parisians with<br />
their colorful, printed bras in woven fabrics.<br />
In 1985, PRINCESSE TAM.TAM presented its first collection<br />
in a prêt-à-porter show. Immediate orders from major<br />
department stores followed. In 1987, PRINCESSE TAM.TAM<br />
opened its first shop in Montparnasse. In the 1990s, the<br />
brand launched lines of homewear and swimsuits.<br />
The developer of the PRINCESSE TAM.TAM brand, PETIT<br />
VEHICULE, became a FAST RETAILING subsidiary in<br />
February 2005.<br />
32<br />
PRINCESSE TAM.TAM Boutique rue Bonaparte<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Growth Strategies<br />
Products<br />
PRINCESSE TAM.TAM has diversified its products into three<br />
coordinated lines of lingerie, homewear, and swimwear.<br />
Innovations involve all aspects of the product, fabrics,<br />
designs, and patterns to accessories and prints. PRINCESSE<br />
TAM.TAM designs all its collections in-house.<br />
While innovative and fashion-conscious, the product also<br />
reflects the artisanship of lingerie manufacturers in France.<br />
Fabrics and supplies are selected from well-known European<br />
manufacturers with production bases in the Mediterranean<br />
region, the Indian Ocean region, and Asian countries.<br />
PRINCESSE TAM.TAM has its own network of 131 directly operated shops<br />
mainly in France as of June 2007. The products are being sold through<br />
major department stores, such as Galeries Lafayette and Printemps.<br />
Outside France, the brand has built a presence in 45 countries through a<br />
combination of 1,500 distributors, including such department stores as<br />
Harrods, Selfridges, La Rinascente, and Neiman Marcus, and an international<br />
network is expanding, in Europe, Russia, the Middle East, and the<br />
Indian Ocean region.
FAST RETAILING ANNUAL REPORT 2007 33
Global Brand <strong>Operations</strong><br />
LINK THEORY HOLDINGS CO.,LTD.<br />
http://www.link-theory.com/<br />
Born in New York and adorning the life scenes of today’s women<br />
Theory is a brand that began life in New York and offers a style springing from the concept of “new<br />
basic,” which features second-to-none comfort and a sophisticated look, with a touch of the trendy.<br />
History<br />
The Theory brand moved into the ranks of global brands<br />
almost immediately after its inception in New York in 1997.<br />
Theory became widely known in Japan in 1999 when Andrew<br />
Rosen, Theory’s founder, and his longtime friend Ricky C.<br />
Sasaki, now the CEO of LINK THEORY HOLDINGS CO.,LTD.<br />
(LTH), introduced the brand to the domestic market through<br />
Link International Co., Ltd., which is now LTH. In 2003, LTH<br />
acquired the U.S.-based Theory LLC., which held the brand’s<br />
licenses. This acquisition opened the way for LTH to establish<br />
a global business franchise for the Theory brand.<br />
FAST RETAILING took its equity stake in January 2004,<br />
and LTH subsequently listed on the Tokyo Stock Exchange’s<br />
Mothers market in June 2005.<br />
34<br />
Theory Paris store<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Products<br />
The Theory brand, conceived in response to the needs of<br />
contemporary women, embodies a modern sensibility without<br />
sacrificing comfort. Theory’s easy-to-wear pieces use highquality<br />
stretch fabrics to create a flattering fit and a beautiful<br />
silhouette. Offering utility that suits women living in today’s<br />
world, the Theory brand is widely acclaimed for collections<br />
that are attuned to the diverse lifestyles of contemporary<br />
women.<br />
The theme of Theory’s collections for 2007 was “THEORY<br />
10: BACK TO THE ROOTS.” Featured items that go back to<br />
Theory’s roots were basics whose essence has not changed<br />
since its birth a decade ago; Theory’s collections continue to<br />
appeal to many women that love fashion.<br />
Growth Strategy<br />
Already a leading brand in the contemporary market in Japan and the<br />
United States, Theory is working to strengthen its foundation in Europe.<br />
LTH set up a Theory marketing office in London in 2007 and opened a<br />
directly-managed store in Paris. The aim is to attain sustainable growth by<br />
improving efficiency in the U.S. and Japanese markets and accelerating the<br />
growth of LTH’s European operations. LTH is developing brands such as<br />
Helmut Lang and Premise as follow-ups to Theory to become a global<br />
enterprise and a leader in the contemporary market.
Corporate Social Responsibility<br />
Making the World a Better Place<br />
We at FAST RETAILING seek to enrich people’s lives around the world by continuing to innovate the<br />
way we do business in the apparel retail industry.<br />
As a modern company contributing consistent value to the world today, we strive to manage our firm<br />
correctly. We aim to grow along with and not at the expense of society, and to help formulate the global<br />
standards of the future. We aspire to make the world a better place!<br />
CONTENTS<br />
36 <strong>UNIQLO</strong> All-Product Recycling<br />
38 CSR Policy<br />
39 Compliance<br />
40 Promoting Diversity<br />
41 Environmental Preservation and Community Service<br />
FAST RETAILING ANNUAL REPORT 2007 35
<strong>UNIQLO</strong> All-Product Recycling<br />
What You May Not Need, Someone Else Does<br />
<strong>UNIQLO</strong>’s Clothes Recycling Expanded<br />
from Fleeces to All Products<br />
The first items <strong>UNIQLO</strong> began to recycle were its fleeces.<br />
These items were widely used and loved by <strong>UNIQLO</strong><br />
customers, but, when they were no longer needed and<br />
discarded, they place a burden on the environment.<br />
Determined to address this problem seriously, <strong>UNIQLO</strong><br />
began fleece-recycling activities.<br />
Beginning in September 2006, these recycling activities,<br />
which began with fleeces, have been expanded to<br />
include “all products sold in <strong>UNIQLO</strong> stores.” Recycling<br />
campaigns are held every year in March and September<br />
at <strong>UNIQLO</strong> stores.<br />
Most Items Received from Our Customers<br />
Can Still Be Worn<br />
Under <strong>UNIQLO</strong>’s recycling campaigns, customers are<br />
requested to bring used clothing to <strong>UNIQLO</strong> stores. In<br />
September 2006, about 140,000 items were collected for<br />
recycling, and this figure expanded to 300,000 items in<br />
March 2007 and then to 430,000 in September 2007.<br />
About 90% of these items were still in wearable condition.<br />
We believe that the best way to respond to the<br />
goodwill of customers is to reuse the garments customers<br />
have left with <strong>UNIQLO</strong> for recycling.<br />
We made inquiries at various international organizations<br />
and considered differing methods for making these<br />
items available for reuse. We learned that making garments<br />
available for reuse is more difficult than we had<br />
imagined, and had to solve a range of problems. These<br />
included providing for the costs of necessary storage,<br />
transportation, and distribution of the donated apparel<br />
items, making applications to the countries that would<br />
36<br />
Flow of <strong>UNIQLO</strong> All-Product Recycling<br />
Customers<br />
Collection Transport<br />
<strong>UNIQLO</strong><br />
Stores<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Sorting<br />
facilities for<br />
recycling<br />
West Japan area<br />
East Japan area<br />
85%<br />
01%<br />
14%<br />
receive the items, the sorting and appropriate distribution<br />
of the garments, and the choice of partners to work with.<br />
After discovering that there were many constraints, we<br />
finally found our way to the United Nations High<br />
Commissioner for Refugees (UNHCR). Apparel items are<br />
in short supply at refugee camps, and <strong>UNIQLO</strong> items are<br />
able to fill these needs. To provide for the temporary storage<br />
of the apparel items and transport, we secured the<br />
full cooperation of the Japan Relief Clothing Center, a<br />
non-profit organization.<br />
<strong>UNIQLO</strong> bore the full burden of a series of costs,<br />
including transportation expenses, warehousing costs,<br />
and the cost of sorting the apparel items into men’s and<br />
women’s and by season.<br />
Items Delivered to Refugee Camps in<br />
Thailand, Nepal, Uganda, and Tanzania<br />
Decisions on which refugee centers the apparel items<br />
would be delivered to were made in consultation with<br />
UNHCR, based on the level of urgency and need. As a<br />
result, the apparel items recovered in September 2006<br />
were delivered to refugees in Thailand and Nepal (with<br />
deliveries actually made in February 2007). In addition,<br />
about 85% of the approximately 300,000 items recovered<br />
in the September recycling initiative were given to<br />
refugee camps in Uganda and Tanzania through UNHCR<br />
(with deliveries made in November 2007).<br />
There was concern about the possible adverse impact<br />
on local apparel industries when the apparel items were<br />
stolen or delivered. For this reason, <strong>UNIQLO</strong> employees<br />
and the <strong>UNIQLO</strong> executive officer in charge of CSR went<br />
to the local areas to confirm that apparel supplied by<br />
customers was actually delivered to their destination.<br />
Donation as relief provisions (reuse)<br />
● Transport<br />
NPOs (Japan Relief Clothing Center)<br />
● Reception and transfer<br />
UNHCR (United Nations High Commissioner<br />
for Refugees)<br />
Recycled into fibers<br />
Insulation and industrial fibers<br />
Recycled into fuel<br />
Power-generating fuel<br />
Refugee camps<br />
Thailand<br />
Nepal<br />
Uganda<br />
Tanzania<br />
These recycling activities are being undertaken with the cooperation of many groups of people, including our customers, other corporations,<br />
NPOs, UNHCR, and the recipient countries.<br />
Collection: Products that are no longer needed are directly collected from customers at <strong>UNIQLO</strong> stores.<br />
Sorting: The products are sorted at two facilities in Japan into either reusables or recyclables.<br />
Reuse: Reusable clothing is donated to refugees as relief provisions in cooperation with the UNHCR and NPOs.<br />
Recycling: Depending on the material recyclable clothing is used as fuel for electric power generation or as material for new fiber products.
Kazuhiro Nitta, Vice President in charge of CSR, presents<br />
garments directly to refugees in a camp in Nepal.<br />
Nitta says, “Speaking with the refugees, I had opportunities<br />
to rethink the role clothes play in people’s lives—<br />
keeping peace of mind and making life cheerful. For<br />
<strong>UNIQLO</strong> to continue this initiative is for us to keep learning<br />
about life and people.”<br />
FAST RETAILING ANNUAL REPORT 2007 37
CSR Policy<br />
Our Standard for CSR Activities: “Is It Good for Society?”<br />
Our Approach<br />
We believe the ultimate goal of CSR activities is to change<br />
the world for the better. Companies fulfill their social<br />
responsibilities by creating value through their business,<br />
making profits and paying taxes, and maintaining employment.<br />
Corporate responsibilities also include the proper<br />
allocation of earnings to shareholders, partners, employees,<br />
and management. Morever, we believe truly global<br />
companies should look beyond national borders and ethnic<br />
identities and consider how they can better contribute<br />
to those who suffer from international disputes, catastrophes,<br />
and other circumstances beyond their control.<br />
In our day-to-day business activities, we constantly ask<br />
ourselves: “Is it good for society?” FAST RETAILING<br />
always considers this before taking action.<br />
FAST RETAILING Group Stakeholders<br />
and CSR Priorities<br />
38<br />
Shareholders and Investors<br />
Effective Management and<br />
Profit Sharing<br />
Fair Disclosure<br />
� PR and IR activities<br />
� Disclosure of CSR activities<br />
Society and the Environment<br />
Sustainable Development<br />
Environment<br />
� Product recycling<br />
� Environmental activities<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Customers<br />
Integrity<br />
Customer Satisfaction<br />
� Quality and safety control<br />
� High-quality products<br />
Holding Company<br />
FAST RETAILING CO., LTD.<br />
Group Companies<br />
Corporate<br />
Governance<br />
Compliance<br />
Promoting CSR Activities<br />
To promote CSR activities, in November 2005, FAST<br />
RETAILING formed the CSR Committee on a Groupwide<br />
basis. This committee meets every other month and is<br />
chaired by the vice president in charge of CSR. Members<br />
include external directors, the CEO, other officers, and<br />
influencers from outside the Group. The committee is<br />
responsible for clarifying the priorities for CSR activities<br />
(see below) and discussing such issues as compliance,<br />
diversity, quality and safety management, the environment,<br />
and community service.<br />
In 2006, we issued our first CSR Report 2006 and distributed<br />
it to all employees to enhance their understanding<br />
of CSR activities. We believe this report can serve as a<br />
tool to ensure proper disclosure and improve our communication<br />
with our stakeholders.<br />
You can access our CSR report on our Website at:<br />
http://www.fastretailing.com/eng/csr<br />
Business Partners<br />
Fairness<br />
Constructive Relationship<br />
� Compliance at partner factories<br />
� Sound relationships with business<br />
partners<br />
Employees<br />
Work Environment<br />
Human Resources Development<br />
� Compliance<br />
� Diversity<br />
� Career development
Compliance<br />
Compliance in Decision Making and Business Processes<br />
Our Code of Conduct<br />
In September 2004, FAST RETAILING set its Code of<br />
Conduct (CoC) and introduced it to all employees. As our<br />
business activities have become global in scope, we have<br />
also prepared English, Chinese, Korean, French versions<br />
in addition to the original Japanese-language version, and,<br />
as of the end of fiscal 2007, all Group companies* had<br />
adopted our CoC. We conduct training for employees to<br />
confirm the CoC once a year.<br />
*Excluding equity-method affiliates<br />
Compliance Hotline (Reporting/Counseling)<br />
In case employees have concerns about their work or<br />
become concerned about violations of the CoC, we have<br />
established a hotline to allow them to report their concerns<br />
and provide information as well as receive counseling on a<br />
confidential basis. All employees can use this hotline and<br />
receive advice from external legal counsel. Reports and the<br />
content of advice are kept in strict confidence, and, when<br />
necessary, the CoC committee decides on appropriate<br />
measures in response.<br />
Guidelines to Prevent Improper Behavior<br />
Based on Superior Positions<br />
FAST RETAILING believes that it must take the initiative in<br />
ensuring that it does not misuse its superior bargaining<br />
position. <strong>UNIQLO</strong> in particular, which has 790 stores<br />
around the world and orders large volumes of merchandise,<br />
is believed to be in a position to easily use its superior<br />
bargaining position against its partners. For this reason,<br />
<strong>UNIQLO</strong> established its Business Ethics Committee in<br />
2004 and has prepared Guidelines to Prevent Improper<br />
Behavior Based on Superior Positions. <strong>UNIQLO</strong> conducts<br />
periodic surveys to determine whether its employees are<br />
exerting improper pressure on its principal partners in<br />
Japan and overseas. The committee then gives guidance<br />
to units that appear to have problems in this area.<br />
Code of Conduct for Production Partners<br />
<strong>UNIQLO</strong> emphasizes compliance throughout its supply<br />
chain. With this in mind, in 2004, <strong>UNIQLO</strong> prepared a<br />
“Production Partner Code of Conduct” for its approximately<br />
70 principal production factories overseas, principally<br />
in China, and designated those factories that signed<br />
a pledge to abide by this CoC as its partner factories. At<br />
these facilities, a third party monitors activities, with the<br />
aims of protecting the human rights of the people<br />
employed by these factories and improving their response<br />
to environmental issues.<br />
If, as a result of monitoring activities, certain workplaces<br />
receive a classification of C (deficiencies in labor contracts,<br />
working hours, or other matters) or D (use of child<br />
labor or forced labor), <strong>UNIQLO</strong> visits these factories and<br />
provides advice. Factories that fail to receive ratings of A<br />
or B after their second monitoring are subject to cutbacks<br />
or the suspension in transactions.<br />
Quality and Safety of <strong>UNIQLO</strong> Products<br />
<strong>UNIQLO</strong> has formed quality and safety control teams in its<br />
Japan and Shanghai offices. They are responsible for confirming<br />
that all products meet <strong>UNIQLO</strong>’s internal standards<br />
for product quality and safety and for responding to<br />
customer inquiries regarding quality.<br />
Japan Industrial Standards (JIS) specifications have<br />
been adopted for all apparel products sold in Japan, and<br />
systems for inspection and supervision are in place to<br />
check on whether products meet <strong>UNIQLO</strong>’s even stricter<br />
quality and safety standards. In addition, since safety criteria<br />
outside Japan vary from country to country, <strong>UNIQLO</strong><br />
has established quality and safety standards that meet the<br />
standards of each country and has established systems<br />
for strict inspection and supervision. Samples of all materials<br />
used in <strong>UNIQLO</strong> products are subjected to inspections<br />
for safety (including inspections for the fastness of dyes,<br />
formalin, and other substances) by third-party public<br />
inspection agencies and other organizations. In addition,<br />
various inspections are carried out in the production and<br />
distribution stages.<br />
In the event that problems related to products are discovered,<br />
the safety of customers is confirmed, and investigations<br />
are conducted on the causes of these problems.<br />
Depending on the circumstances, <strong>UNIQLO</strong> may conduct<br />
recalls or suspend sales and production. In addition,<br />
<strong>UNIQLO</strong> discloses related information to its customers<br />
through its Website, newspapers, and other media.<br />
Testing for formalin conducted at partners’ factories<br />
FAST RETAILING ANNUAL REPORT 2007 39
Promoting Diversity<br />
Creating Work Environments with People from Diverse Backgrounds<br />
Promoting Diversity<br />
As part of its commitment to promoting diversity, <strong>UNIQLO</strong><br />
inaugurated its Female Store Manager Project. This project<br />
offers support for long-term career building to<br />
<strong>UNIQLO</strong>’s female store managers, who account for about<br />
20% of all <strong>UNIQLO</strong> store managers in Japan. In addition,<br />
<strong>UNIQLO</strong> publishes a magazine entitled style that highlights<br />
the activities of female employees and holds a “Women’s<br />
Forum” conference periodically on the theme of career<br />
development for women. Male supervisors and other male<br />
employees are invited to these conferences, and they<br />
stimulate a lively exchange of opinions.<br />
Employment of Persons with Disabilities<br />
Beginning in 2001, <strong>UNIQLO</strong> has adopted a goal of having<br />
at least one worker with disabilities on the staff of each of<br />
its stores, thus providing <strong>UNIQLO</strong> staff with opportunities<br />
to work with team members from diverse backgrounds.<br />
As of June 2007, 7.43% of <strong>UNIQLO</strong> employees have disabilities,<br />
thus making <strong>UNIQLO</strong> one of the leaders of such<br />
initiatives in Japan among companies with 5,000 or more<br />
employees. These initiatives have been recognized, and in<br />
June 2007, <strong>UNIQLO</strong> received the “Award for Supporting<br />
Re-Challengers” from Japan’s Cabinet Office.<br />
40<br />
Beginning in April 2007, <strong>UNIQLO</strong> introduced a program for<br />
regular employees that allows them to be employed in a specific<br />
region and not be subject to rotation among different<br />
areas. This program is targeted at capable employees who<br />
otherwise would not aspire to become regular employees<br />
because of the issues that regional job rotation would pose<br />
for their personal lives and it provides them with opportunities<br />
for a fuller work life. As of September 2007, about 1,900 persons<br />
had become regional regular employees, and <strong>UNIQLO</strong> is<br />
scheduled to provide this status to about 5,000 employees by<br />
the end of March 2009.<br />
Chizuru Takeda of the Ginza Store Comments:<br />
“The regional regular employee program has definitely raised<br />
my motivation.”<br />
“I joined <strong>UNIQLO</strong> as a part-time employee, but took advantage of this<br />
new program to become a regular, permanent employee. I thoroughly<br />
enjoyed serving customers but wanted to move to a more-responsible<br />
position. My motivation went way up when I became a permanent<br />
staff, and I told myself I’m going to give it all I got!”<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Regional Regular Employee Program<br />
Improving “Work/Life Balance”<br />
One of <strong>UNIQLO</strong>’s main aims is to create an environment<br />
where employees can work with ease and feel secure,<br />
and in keeping with this, there is a system in place that<br />
allows time off for child-rearing and caring for sick family<br />
members as well as a consulting function for mental<br />
health care. In the Tokyo Office, Tuesdays through Fridays<br />
each week are “no overtime days,” and there is a cap on<br />
overtime hours per month at <strong>UNIQLO</strong> stores. <strong>UNIQLO</strong> has<br />
initiated a program to promote a good work/life balance<br />
that includes encouraging the use of allotted vacation<br />
time.<br />
Employment Ratio of Persons with Disabilities<br />
(%)<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
1.27<br />
6.35<br />
6.81<br />
7.55<br />
7.66<br />
7.31<br />
7.43<br />
Legal<br />
Minimum:1.8<br />
FY 2001 2002 2003 2004 2005 2006 2007<br />
Note: The employment ratios for the years through 2006 are as of March 31 of<br />
each year; the employment ratio for 2007 is as of June 1, 2007.
Environmental Preservation and Community Service<br />
Serving Communities in Ways Only an SPA Enterprise Can<br />
Energy Conservation in <strong>UNIQLO</strong> Stores<br />
<strong>UNIQLO</strong> conducts a range of activities to conserve energy<br />
and resources in its stores. These activities began in 2003<br />
with a 10% reduction in electric power usage and this was<br />
followed by success in making a 10% cut in 2006 in the<br />
use of cardboard for transporting products to <strong>UNIQLO</strong><br />
retail stores and an approximate 10% reduction in 2007 in<br />
shopping bag raw materials through the use of lighter,<br />
polyethylene materials. In October 2007, <strong>UNIQLO</strong> implemented<br />
its Environmental Policy and Environmental<br />
Guidelines. Looking ahead, <strong>UNIQLO</strong> is moving forward<br />
with initiatives that will make more specific reductions in<br />
the burden its activities place on the natural environment.<br />
Emergency Disaster Relief<br />
Based on customer views that <strong>UNIQLO</strong> should supply<br />
goods to assist refugees and people victimized by natural<br />
disasters, in 2001 <strong>UNIQLO</strong> began to provide clothing and<br />
make donations to people living in regions plagued by<br />
conflicts and the effects of natural disasters.<br />
Support for the Setouchi Olive Foundation<br />
The Setouchi Olive Foundation engages in the planting<br />
of olive trees on the islands in Japan’s Seto Inland<br />
Sea, including Teshima Island, where illegal<br />
dumping of industrial waste, the extraction of<br />
sand and other soil deposits, and harmful<br />
gas emissions have damaged the beautiful<br />
natural environment of the area.<br />
<strong>UNIQLO</strong> endorses the activities of the<br />
foundation and has supported its activities by placing donation boxes at<br />
all its stores throughout Japan since 2001 and matching the funds<br />
collected at its stores with its own contributions to the foundation.<br />
Through the <strong>UNIQLO</strong> Volunteer Club, a total of 200 FAST RETAILING<br />
employees have participated in the planting of olive trees as of October<br />
2007. Participants in these tree-planting activities have included personnel<br />
from <strong>UNIQLO</strong> stores nationwide, Head Office employees, and operating<br />
officers. Residents of Teshima Island spoke to participants about<br />
the history of environmental pollution on the island and related problems,<br />
and these activities provided those involved with an opportunity to<br />
experience environmental issues firsthand.<br />
Support for the Special Olympics<br />
The Special Olympics is an international sports organization<br />
that provides opportunities to persons with intellectual<br />
disabilities for training and participation in games and<br />
competitions. <strong>UNIQLO</strong> became an official partner offering<br />
support for these activities beginning with the Special<br />
Olympics Nippon in 2002. <strong>UNIQLO</strong> personnel participated<br />
as volunteer staff members at the Summer National<br />
Games Kumamoto in November 2006, and <strong>UNIQLO</strong><br />
donated about 3,000 uniforms to the Japan national team<br />
participating in the 2007 World Summer Games Shanghai<br />
in October 2007.<br />
Initiatives to Recycle All Products<br />
In September 2006, <strong>UNIQLO</strong> launched a program to provide<br />
customers the opportunity to recycle all the products<br />
sold in its stores. <strong>UNIQLO</strong> now implements programs to<br />
recover such goods at its stores in March and September<br />
each year. Since the beginning of this program, items<br />
recovered have been as follows:<br />
Apparel items collected September 2006 140,000<br />
(estimates): March 2007 300,000<br />
September 2007 430,000<br />
Note: For further details on Recycling Initiatives, please refer to<br />
pages 36 and 37.<br />
Planting olive trees<br />
■ Number of trees planted: 57,144<br />
■ Total donations received from customers:<br />
¥103,637,519<br />
As of November 2007.<br />
FAST RETAILING ANNUAL REPORT 2007 41
Financial Section<br />
42<br />
FAST RETAILING ANNUAL REPORT 2007<br />
CONTENTS<br />
43 Six-Year Financial Summary<br />
44 Management’s Discussion and Analysis<br />
52 Consolidated Balance Sheets<br />
54 Consolidated Statements of Income<br />
55 Consolidated Statements of Changes in Net Assets<br />
56 Consolidated Statements of Cash Flows<br />
57 Notes to Consolidated Financial Statements<br />
65 Report of Independent Auditors
Six-Year Financial Summary<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
Fiscal years ended August 31<br />
For the year:<br />
Millions of yen except per share data and other data<br />
2007 2006 2005 2004 2003 2002<br />
Net sales ¥,525,203 ¥,448,819 ¥,383,973 ¥,339,999 ¥,309,789 ¥,344,171<br />
Operating income 64,963 70,355 56,692 63,954 41,308 50,418<br />
Net income 31,775 40,437 33,884 31,365 20,933 27,851<br />
ROE (%) 13.6% 19.7% 19.7% 20.8% 15.9% 23.2%<br />
Per share data (yen):<br />
Net income ¥0,311.98 ¥0,397.38 ¥0,331.99 ¥0,304.92 ¥0.203.05 ¥0,269.54<br />
Diluted net income — 397.26 — — — —<br />
Net assets 2,357.79 2,240.77 1,791.61 1,583.67 1,378.58 1,215.43<br />
Cash dividends:<br />
Adjusted 130.00 130.00 130.00 115.00 55.00 55.00<br />
Unadjusted 130.00 130.00 130.00 115.00 55.00 90.00<br />
Dividend payout ratio (%)<br />
Net cash provided by (used in)<br />
41.7% 32.7% 39.0% 37.7% 27.1% 20.4%<br />
operating activities ¥0,18,847 ¥0,57,477 ¥0,15,398 ¥0,44,120 ¥0,35,768 ¥0(19,361)<br />
Net cash used in investing activities<br />
Net cash provided by (used in)<br />
(28,783) (41,907) (16,823) (20,730) (10,118) (9,927)<br />
financing activities (12,759) 1,932 (14,854) (8,677) (10,179) (20,431)<br />
Depreciation and amortization 6,567 5,364 3,681 2,737 2,364 1,942<br />
Capital expenditures 26,441 16,261 11,649 11,220 11,633 11,020<br />
At year-end:<br />
Cash and equivalents ¥,119,216 ¥,141,404 ¥,121,061 ¥,136,461 ¥,123,733 ¥,107,263<br />
Total assets* 1 359,770 379,655 272,846 240,897 219,855 210,922<br />
Total net assets* 1 243,283 240,480 182,349 161,434 140,505 123,632<br />
Equity ratio (%) 66.7% 60.1% 66.8% 67.0% 63.9% 58.6%<br />
Interest-bearing debt 24,429 22,774 6,185 52 — 5,809<br />
Debt-equity ratio (%) 10.0% 9.4% 3.4% 0.0% — 4.7%<br />
Other data:<br />
Number of shares outstanding 106,073,656 106,073,656 106,073,656 106,073,656 106,073,656 106,073,656<br />
Total number of stores 1,828 1,632 1,232 655 622 585<br />
Directly-managed stores in Japan [1,233] [1,093] [775] [635] [582] [558]<br />
Directly-managed stores overseas [247] [196] [157] [9] [26] [15]<br />
Franchise stores [348] [343] [300] [11] [14] [12]<br />
Total sales floor space (m 2 ) 664,625m 2<br />
549,851m 2<br />
437,196m 2<br />
363,901m 2<br />
335,849m 2<br />
305,504m 2<br />
Number of full-time employees* 2 6,514 3,990 2,668 1,782 1,776 1,853<br />
*1 Beginning with the fiscal year ended August 31, 2006, minority interests have been included in net assets.<br />
*2 Beginning with the fiscal year ended August 31, 2007, the number of entrusted operating officers has not been included in the number of full-time employees.<br />
FAST RETAILING ANNUAL REPORT 2007 43
Management’s Discussion and Analysis<br />
During fiscal 2007, ended August 31, 2007, the Japanese<br />
economy was supported by improvement in employment<br />
accompanying gains in corporate performance and the rising<br />
trend in capital investment. The effects of these positive<br />
developments finally began to have a moderately favorable<br />
impact on the household sector. However, in the apparel<br />
industry, along with the foreseen trends toward demographic<br />
aging of the population and the decline in the population,<br />
since the number of persons in the younger age categories,<br />
who are major purchasers of apparel, is decreasing and the<br />
ratio of disposable income spent on apparel and footwear is<br />
declining, the market as a whole is expected to continue to<br />
shrink. For this reason, the intensely competitive, “survival of<br />
the fittest” conditions in the market are expected to continue.<br />
Amid this operating environment, to sustain growth, the<br />
FAST RETAILING Group made the transition to a holding<br />
company structure in November 2005 and began to implement<br />
business reforms centered especially on refocusing on<br />
entrepreneurial values, promoting globalization, and strengthening<br />
Group management. By “refocusing on entrepreneurial<br />
values,” we mean to make certain that a corporate culture<br />
takes root that emphasizes high growth and a spirit of innovation<br />
and challenge, while rejecting the tendency to take it<br />
easy now. “Promoting globalization” means taking a global<br />
perspective in all of our activities, including products, operations,<br />
human resources, and management, while, at the<br />
same time, undertaking full-scale expansion into overseas<br />
markets. “Strengthening Group management” means taking<br />
full advantage of the possibilities of the new holding company<br />
structure form of organization and entering related growth<br />
businesses through M&A and setting up new enterprises. We<br />
also mean realizing synergies with <strong>UNIQLO</strong> CO., LTD., and<br />
maximizing the value of the Group as a whole.<br />
Based on these business policies, in our mainstay <strong>UNIQLO</strong><br />
operations, we have located R&D centers in Tokyo, New<br />
York, Paris, and Milan that draw on the capabilities of toplevel<br />
personnel from around the world, and they are moving<br />
forward with product development. In addition, working with<br />
TORAY INDUSTRIES, INC., Kaihara Co., Ltd., and other<br />
strategic partners, we are jointly developing fabrics and<br />
undertaking other activities that are further raising the level of<br />
quality of and differentiating <strong>UNIQLO</strong> products.<br />
In our store opening strategy, we are implementing a program<br />
to “scrap” our smaller-format stores with about 500<br />
square meters or less of sales space and aggressively replacing<br />
them with larger stores. Regarding store locations, along<br />
with our suburban freestanding roadside stores, which have<br />
been the standard format thus far, we are locating new<br />
stores in urban areas, large shopping centers, key transportation<br />
stations, and other high traffic locations, and we are<br />
carefully monitoring their sales and profit performance as well<br />
as their potential for growth. We are placing particular<br />
emphasis on opening large-format stores with about 1,600<br />
square meters of sales space, which are about twice the size<br />
44<br />
1 Operating Environment and Management Strategy<br />
FAST RETAILING ANNUAL REPORT 2007<br />
of previous standard stores (which have between 700 square<br />
meters and 800 square meters of sales space). In 2007, we<br />
also opened a new store in Kobe’s Harborland district and in<br />
Tokyo’s Setagaya Chitosedai area, with 3,300 square meters<br />
of sales space.<br />
Overseas, in November 2006, we opened a global flagship<br />
store in New York’s trendy Soho district with about 3,300<br />
square meters of sales floor space. Similarly, in December<br />
2006, we opened our largest store in Asia outside Japan in<br />
the Pudong district of Shanghai. This new store has offered<br />
top-level products, shop space, and services, thus making a<br />
major contribution to increasing the brand awareness and<br />
brand power of <strong>UNIQLO</strong>.<br />
In the <strong>UNIQLO</strong> Japan operations during the fiscal year<br />
under review, our campaigns to promote products suited to<br />
the season were effective. As a result of the strong performance<br />
of skinny jeans and other “bottoms” apparel, sales per<br />
customer rose, thus contributing to higher sales at existing<br />
stores. Also, along with the rise in directly-managed stores,<br />
sales overall showed an increase. However, because of the<br />
decline in gross margins, owing to the clearance sales<br />
because of unseasonable weather conditions and other factors,<br />
and the increase in advertising costs for building brand<br />
power, profit declined.<br />
<strong>UNIQLO</strong> International operations reported excellent performances<br />
in mainland China, including Hong Kong, and<br />
Number of Stores by Business<br />
2007 2006 2005<br />
End End End<br />
Aug. Open Close Aug. Aug.<br />
<strong>UNIQLO</strong> 787 92 55 750 693<br />
<strong>UNIQLO</strong> Japan: 748 76 48 720 679<br />
Directly-managed 730 75 48 703 664<br />
Franchise 18 1 0 17 15<br />
<strong>UNIQLO</strong> International: 39 16 7 30 14<br />
U.K. 11 4 1 8 6<br />
China 9 2 0 7 8<br />
U.S. 1 3 6 4 —<br />
South Korea 14 4 0 10 —<br />
Hong Kong 4 3 0 1 —<br />
CABIN 211 28 18 201 —<br />
G.U. 50 50 0 — —<br />
ONEZONE 332 21 19 330 329<br />
ASPESI 12 5 0 7 —<br />
COMPTOIR DES COTONNIERS 305 64 3 244 200<br />
PRINCESSE TAM.TAM 131 33 2 100 —<br />
TOTAL 1,828 293 97 1,632 1,232<br />
Number of Directly-Managed Stores—<strong>UNIQLO</strong> Japan<br />
2007 2006 2005 2004 2003<br />
Stores opened 75 84 69 81 76<br />
Stores closed 48 45 31 36 53<br />
Net increase 27 39 38 45 23<br />
Fiscal year-end 000 730 703 664 626 581
Korea, and we were able to report sales almost twice as high<br />
as in the previous fiscal year in each of these areas and a<br />
movement into the black profitwise. Although we continued<br />
to report losses in the United Kingdom and the United States<br />
because of costs associated with the opening of global flagship<br />
stores, sales experienced steady expansion. For<br />
<strong>UNIQLO</strong> International operations as a whole, we reported a<br />
major increase in sales and a decline in losses.<br />
Among Japan Apparel operations, G.U. CO., LTD., began<br />
opening stores for g.u., its new brand of low-price casual<br />
apparel in October 2006. Although G.U. showed losses<br />
initially, the number of stores reached 50 at the end of August<br />
2007, and it is continuing to establish its business base. In<br />
August 2007, we succeeded in making a friendly takeover<br />
bid for CABIN CO., LTD., which is developing a chain of retail<br />
stores specializing in women’s apparel, thus raising our<br />
voting ownership percentage from 51.7% to 96.9%. CABIN<br />
reported a slight loss for the fiscal year, because of a lackluster<br />
performance during its summer apparel campaign, but<br />
going forward, we will move ahead with our operational<br />
reforms to full capacity. ONEZONE CORPORATION, a Group<br />
company in the footwear business, is continuing to take<br />
initiatives to implement business restructuring as the operating<br />
environment in its sector remains severe. Also, in<br />
November 2006, we underwrote a third-party placement of<br />
shares for VIEWCOMPANY CO.,LTD., an enterprise in the<br />
women’s footwear business (listed on the JASDAQ<br />
exchange), and that company joined our Group as a company<br />
accounted for under the equity method.<br />
In our Global Brand operations, performances of Créations<br />
Nelson S.A.S., a company developing the COMPTOIR DES<br />
COTONNIERS French casual brand in Europe, and PETIT<br />
VEHICULE S.A.S., a company developing the PRINCESSE<br />
TAM.TAM line, a well-known French lingerie brand, both<br />
reported continued robust performances. These two companies<br />
have made major contributions to developing the<br />
Group’s business base in Europe.<br />
2 Results of <strong>Operations</strong><br />
In the fiscal year ended August 31, 2007, FAST RETAILING<br />
reported consolidated net sales of ¥525.2 billion, an increase<br />
of 17.0% over the previous fiscal year. Operating income<br />
amounted to ¥64.9 billion, 7.7% lower than for the prior fiscal<br />
year. Ordinary income was ¥64.6 billion, a decline of 11.7%<br />
year on year, and net income was ¥31.7 billion, 21.4% lower<br />
than for the previous year.<br />
� Consolidated Net Sales and Gross Profit<br />
Consolidated net sales experienced double-digit growth in<br />
percentage terms and amounted to ¥525.2 billion, an<br />
increase of ¥76.3 billion (or 17.0%) year on year. The<br />
increase in net sales came from a ¥31.1 billion rise in sales of<br />
<strong>UNIQLO</strong> Japan, an ¥8.2 billion increase in sales of <strong>UNIQLO</strong><br />
International, a ¥23.8 billion rise in sales of Japan Apparel<br />
operations (including sales of CABIN CO., LTD., which was<br />
Net Sales and Gross Profit<br />
� Net Sales<br />
� Gross Profit Margin<br />
(Billions of Yen) (%)<br />
309.8<br />
44.2<br />
340.0<br />
48.0<br />
384.0<br />
44.3<br />
448.8<br />
47.3<br />
525.2<br />
47.3<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Sales by Group Operation<br />
Breakdown of Net Sales<br />
Global Brand<br />
¥36.7 billion<br />
(7.0%)<br />
Japan<br />
Apparel<br />
¥46.0 billion<br />
(8.8%)<br />
<strong>UNIQLO</strong><br />
International<br />
¥16.9 billion<br />
(3.2%)<br />
Other<br />
¥0.9 billion<br />
(0.1%)<br />
<strong>UNIQLO</strong> Japan<br />
¥424.7 billion<br />
(80.9%)<br />
y/y %<br />
Billions of Yen 2007 2006 Change Change<br />
<strong>UNIQLO</strong> Japan:<br />
Net sales ¥424.7 ¥393.6 ¥31.1 +7.9<br />
Operating income 64.0 68.8 (4.8) (7.1)<br />
<strong>UNIQLO</strong> International:<br />
Net sales 16.9 8.7 8.2 +94.5<br />
Operating loss (1.1) (1.4) 0.3 —<br />
Japan Apparel <strong>Operations</strong>:<br />
Net sales 46.0 22.2 23.8 +107.0<br />
Operating loss (3.5) (0.8) (2.7) —<br />
Global Brand <strong>Operations</strong>:<br />
Net sales 36.7 22.8 13.9 +60.6<br />
Operating income 7.2 4.6 2.6 +55.0<br />
Sales by Product Category<br />
2007 2006<br />
Millions % of Millions % of<br />
of Yen Sales of Yen Sales<br />
Men’s clothing ¥149,094 28.4 ¥155,462 34.6<br />
Women’s clothing 135,341 25.8 121,959 27.2<br />
Children’s clothing 24,014 4.6 22,944 5.1<br />
Inner wear 88,515 16.9 66,361 14.8<br />
Accessories 20,394 3.9 19,260 4.3<br />
Subtotal 417,359 79.5 385,989 86.0<br />
Franchise store, etc. 7,342 1.4 7,619 1.7<br />
<strong>UNIQLO</strong> operations, total 424,701 80.9 393,608 87.7<br />
<strong>UNIQLO</strong> International 16,998 3.2 8,737 1.9<br />
CABIN 21,770 4.1 — —<br />
ONEZONE 20,047 3.8 21,467 4.8<br />
COMPTOIR DES COTONNIERS 24,267 4.6 17,292 3.9<br />
PRINCESSE TAM.TAM 12,471 2.4 5,456 1.2<br />
Apparel-related business*<br />
Other<br />
4,269 0.8 1,634 0.4<br />
(Commercial facilities) 678 0.1 622 0.1<br />
Net sales ¥525,203 100.0 ¥448,819 100.0<br />
*Apparel-related business includes sales of G.U. and ASPESI Japan.<br />
newly consolidated for the fiscal year ended August 2007),<br />
and a ¥13.9 billion increase in Global Brand operations,<br />
including sales of the PRINCESSE TAM.TAM business, which<br />
were newly consolidated for the full fiscal year.<br />
FAST RETAILING ANNUAL REPORT 2007 45
Breakdown of SG&A Expenses<br />
Gross profit rose ¥35.9 billion, to ¥248.3 billion. The gross<br />
profit margin was 47.3%, approximately the same as for the<br />
previous fiscal year, as a 1.1 percentage point decline in the<br />
<strong>UNIQLO</strong> Japan gross profit margin was offset by the contribution<br />
of high-margin Global Brand operations.<br />
� SG&A Expenses<br />
SG&A expenses on a consolidated basis increased ¥41.3 billion,<br />
to ¥183.4 billion, and the ratio of SG&A expenses to<br />
consolidated net sales increased to 34.9%, compared with<br />
31.7% for the previous fiscal year. This increase in expenses<br />
was due to a rise in the ratio of SG&A expenses to sales in<br />
the <strong>UNIQLO</strong> Japan operations, the consolidation of certain<br />
subsidiaries with high ratios of SG&A expenses to sales, and<br />
an increase in the amortization of goodwill.<br />
SG&A expenses in <strong>UNIQLO</strong> Japan in fiscal 2007 amounted<br />
to ¥128.6 billion (representing an increase of 12.7% year<br />
on year). This increase was generally at the level planned,<br />
but, as a result of a shortfall in sales compared with the plan,<br />
the ratio of SG&A expenses to sales increased. In addition to<br />
rises in expenses owing to expansion in employment, personnel,<br />
and advertising expenses incurred in connection with<br />
measures to strengthen the <strong>UNIQLO</strong> brand, rental costs rose<br />
along with the rise in the number of stores located in buildings<br />
in urban centers, shopping centers, and other locations.<br />
The consolidation of certain subsidiaries with higher ratios<br />
of expenses to sales was also a factor driving the ratio of<br />
SG&A expenses to sales higher. These were CABIN and<br />
G.U., which were newly consolidated, PRINCESSE TAM.TAM<br />
business, which was consolidated for the full year, and consolidation<br />
of COMPTOIR DES COTONNIERS business, which<br />
has a higher expenses ratio and reported a substantial rise in<br />
sales for the fiscal year. In addition, amortization of goodwill<br />
rose ¥3.1 billion from the previous fiscal year, to ¥4.2 billion<br />
for the fiscal year under review. Of this total, amortization of<br />
goodwill in connection with the acquisition of Créations<br />
Nelson S.A.S. and PETIT VEHICULE S.A.S. together amounted<br />
to ¥3.8 billion, and amortization in connection with the<br />
purchase of CABIN shares for the fiscal year was ¥0.4 billion.<br />
46<br />
FAST RETAILING ANNUAL REPORT 2007<br />
2007 2006 2005<br />
Millions % to % Millions % to % Millions % to %<br />
of Yen Sales Change of Yen Sales Change of Yen Sales Change<br />
Personnel ¥070,370 13.4 +34.6 ¥052,272 11.6 +25.6 ¥041,620 10.9 +15.2<br />
Advertising and promotion 26,261 5.0 +18.1 22,231 5.0 +9.8 20,246 5.3 +10.7<br />
Rent 43,453 8.3 +26.4 34,377 7.7 +23.8 27,773 7.2 +8.4<br />
Depreciation/amortization 6,567 1.3 +21.4 5,409 1.2 +122.3 2,433 0.6 +32.2<br />
Others 36,780 7.0 +32.4 27,771 6.2 +29.0 21,524 5.6 +24.0<br />
Total ¥183,432 34.9 +29.1 ¥142,063 31.7 +25.1 ¥113,598 29.6 +14.5<br />
Earnings per Share<br />
(Yen)<br />
203.05<br />
304.92<br />
331.99<br />
397.38<br />
311.98<br />
FY ’03 ’04 ’05 ’06 ’07<br />
� Other Gains and<br />
Losses<br />
Other gains amounted to<br />
¥1.9 billion. The principal<br />
other items were a gain of<br />
¥1.4 billion on the sale of<br />
certain fixed assets of<br />
CABIN and ¥0.2 billion<br />
resulting from the reversal<br />
of the allowance for doubtful<br />
accounts of ONEZONE.<br />
Other losses were ¥3.7 billion,<br />
consisting primarily of<br />
Net Income<br />
(Billions of Yen)<br />
FY ’03 ’04 ’05 ’06 ’07<br />
¥1.1 billion in losses due to the removal of fixed assets and<br />
other losses incurred in connection with the closure of stores<br />
in the <strong>UNIQLO</strong> Japan and CABIN operations; ¥1.4 billion in<br />
losses due to the impairment of assets in the ONEZONE,<br />
CABIN, and <strong>UNIQLO</strong> USA; and ¥0.6 billion in the one-time<br />
amortization of goodwill accompanying the write-down of the<br />
value of VIEWCOMPANY stocks.<br />
� Net Income<br />
Net income for fiscal 2007 amounted to ¥31.7 billion, ¥8.6<br />
billion lower than for the previous fiscal year. Net income per<br />
share was ¥311.98, ¥85.40 below the level for fiscal 2006.<br />
Results by Group Operation<br />
<strong>UNIQLO</strong> Japan <strong>Operations</strong><br />
The <strong>UNIQLO</strong> Japan operations, which account for 81% of<br />
consolidated net sales, reported an increase of 7.9% in sales<br />
in fiscal 2007, to ¥424.7 billion. Factors contributing to this<br />
rise in sales were an increase of 27 in the number of directlymanaged<br />
stores compared with the end of the previous fiscal<br />
20.9<br />
31.4<br />
33.9<br />
Operating Income<br />
(Billions of Yen)<br />
41.3<br />
64.0<br />
56.7<br />
40.4<br />
70.4<br />
31.7<br />
64.9<br />
FY ’03 ’04 ’05 ’06 ’07
Number of Stores and Total Sales<br />
Floor Space (<strong>UNIQLO</strong> Directly-<br />
Managed Stores in Japan)<br />
� Total Floor Space (m 2 )<br />
� Number of Stores<br />
321,397<br />
581<br />
358,181<br />
626<br />
392,020<br />
664<br />
427,412<br />
703<br />
471,314<br />
730<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Year-on-Year Sales Trend<br />
at Existing Stores<br />
(<strong>UNIQLO</strong> Stores in Japan)<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Year-on-Year Monthly Sales at Existing Stores in FY2007<br />
(<strong>UNIQLO</strong> Japan)<br />
� Sales<br />
(%)<br />
� Customer Numbers � Average Purchase per Customer<br />
12.6<br />
2.6 9.8<br />
9<br />
2006<br />
-3.4<br />
-4.5 -1.1<br />
5.7<br />
8.0<br />
2.2<br />
0.5<br />
-3.3<br />
-3.9<br />
8.1<br />
8.9<br />
0.7<br />
1.9<br />
10 11 12 1<br />
2007<br />
3.3<br />
1.4<br />
year, an expansion in the sales area per store along with the<br />
implementation of <strong>UNIQLO</strong>’s policy of opening of largeformat<br />
stores, and growth of 1.4% in sales of existing stores.<br />
During fiscal 2007, <strong>UNIQLO</strong> opened 75 stores and closed<br />
48, leaving a total of 730 directly-managed stores and 748<br />
stores (including franchise stores) at the end of the fiscal year.<br />
Of this total number of stores, large-format stores with 1,600<br />
square meters in sales space rose by 21. Also, as a result of<br />
<strong>UNIQLO</strong>’s scrap and build strategy, the average sales space<br />
per store rose to 653 square meters, representing an<br />
increase of 7.2% from the previous year.<br />
In the development of its store network, <strong>UNIQLO</strong> has<br />
taken initiatives since fiscal 2005 to open stores other than<br />
the standard suburban freestanding roadside stores. New<br />
stores have been situated in a greater variety of new locations<br />
and venues, such as urban centers, and have included<br />
large-format stores and specialized stores. With regard to<br />
location, during fiscal 2007, there was a rush to set up new,<br />
larger commercial outlets in the retail industry accompanying<br />
the revision of the three urban development laws governing<br />
store location and size, and <strong>UNIQLO</strong> responded to this development<br />
by aggressively opening new stores in shopping centers<br />
and urban commercial buildings with high levels of<br />
customer drawing power. Regarding roadside stores in urban<br />
areas, the new store located in Tokyo’s Setagaya Chitosedai<br />
residential area reported a robust sales performance for the<br />
fiscal year under review. With regard to store venue and size,<br />
<strong>UNIQLO</strong> moved forward with the development of new stores<br />
suited to individual shopping areas, while adhering strictly to<br />
(%)<br />
–19.7<br />
7.4<br />
4.5<br />
3.8<br />
6.9<br />
2.7<br />
2.9<br />
2.5<br />
2.9<br />
-4.9 -2.1<br />
0.6<br />
2.1<br />
-3.3<br />
-1.3<br />
-11.3<br />
0.7<br />
-0.4<br />
-11.7<br />
1.4<br />
3.6<br />
-4.8<br />
2 3 4 5 6 7 8<br />
-1.4<br />
in-house standards. Store development focused on largeformat<br />
stores with 1,600 square meters of sales space, standard<br />
stores with sales space ranging from 700 square meters<br />
to 800 square meters, and smaller stores with about 160<br />
square meters located inside railway stations and other hightraffic<br />
locations. In addition, in April 2007 <strong>UNIQLO</strong> refurbished<br />
its store in Tokyo’s fashionable Harajuku district and opened<br />
a new “UT STORE HARAJUKU” specializing in T-shirts.<br />
<strong>UNIQLO</strong> has positioned large-format stores as its growth<br />
driver, and, since opening the first of these in the<br />
Shinsaibashi area of Osaka in October 2004, had opened a<br />
total of 7 such outlets through the end of August 2006, and<br />
the number grew to 28 through August 2007. Before beginning<br />
to open large-format stores, <strong>UNIQLO</strong> had expanded by<br />
concentrating on standard store locations handling standard<br />
merchandise and providing standard services; however,<br />
along with the movement to open large-format stores,<br />
<strong>UNIQLO</strong> has been able to expand the in-store inventory of<br />
colors and sizes of best-selling items and expand sales<br />
space for women’s items, which are expected to be a highergrowth<br />
area.<br />
During fiscal 2007, sales of existing outlets rose 1.4% over<br />
the previous fiscal year. Although the number of customers<br />
decreased 0.2%, overall sales rose because of an increase in<br />
sales per customer of 1.5%. The number of customers in the<br />
second half of the fiscal year was down 3.5%, but this was<br />
because of unseasonable weather conditions from the latter<br />
half of May onward, which resulted in a lackluster performance<br />
during the summer season. The rise in sales per customer was<br />
due to expansion in sales of denim products, such as skinny<br />
jeans, which resulted in an increase in average product prices.<br />
The gross profit margin of the <strong>UNIQLO</strong> Japan operations<br />
decreased 1.1 percentage points, to 45.4%. The principal<br />
reason for this decline was an increase in discount sales of<br />
inventories owing to the unusually warm winter weather in the<br />
first half of the fiscal year. In the second half, we strengthened<br />
our numerical monitoring functions to adjust the<br />
balance among production, sales, and inventories and thus<br />
gained control over the gross profit margin.<br />
<strong>UNIQLO</strong> International <strong>Operations</strong><br />
During the fiscal year ended August 31, 2007, <strong>UNIQLO</strong><br />
International operations posted sales of ¥16.9 billion, almost<br />
twice the level for the previous fiscal year. With the opening of<br />
global flagship stores in the United Kingdom and the United<br />
States, expenses are continuing to run ahead of sales resulting<br />
in losses, but operations in mainland China, including<br />
Hong Kong, and Korea are posting smooth performances<br />
and reporting profits. As a result, <strong>UNIQLO</strong> International operations<br />
as a whole reported a loss of ¥1.1 billion for the fiscal<br />
year under review, smaller than the ¥1.4 billion loss for the<br />
previous fiscal year.<br />
In its overseas operations, <strong>UNIQLO</strong> is implementing a<br />
“flagship store strategy” aimed at strengthening the <strong>UNIQLO</strong><br />
brand. In November 2006, <strong>UNIQLO</strong> successfully opened a<br />
global flagship store in New York’s trendy Soho district with<br />
3,300 square meters of sales floor space. In addition,<br />
FAST RETAILING ANNUAL REPORT 2007 47
<strong>UNIQLO</strong> opened another global flagship store on London’s<br />
Oxford Street in November 2007, and its first concept shop in<br />
outer Paris in December 2007 in La Defense district. In fiscal<br />
2008, plans call for opening a global flagship store in Paris.<br />
Japan Apparel <strong>Operations</strong><br />
Japan Apparel operations include ONEZONE, a footwear<br />
retail chain; CABIN, a retail chain marketing women’s apparel;<br />
and G.U., a retailer of g.u. brand low-price casual apparel. In<br />
fiscal 2007, sales of Japan Apparel operations amounted to<br />
¥46.0 billion, more than double the level of the previous fiscal<br />
year, and the operating loss was ¥3.5 billion.<br />
During the fiscal year under review, ONEZONE worked to<br />
standardize the operations of its stores and strengthen its<br />
lineup of products designed in-house, but was unable to<br />
achieve recovery in sales in fiscal 2007 and is continuing to<br />
post losses.<br />
CABIN moved forward with management reforms during<br />
the fiscal year, working to draw on the strengths of <strong>UNIQLO</strong>’s<br />
SPA business model (integrated from apparel production to<br />
retail sales), but these efforts were not fully reflected in performance<br />
for fiscal 2007, and the company reported a small<br />
loss.<br />
The Group’s newest business, G.U. opened 50 stores during<br />
fiscal 2007 and consolidated its business base. During the<br />
latter half of the fiscal year, G.U. reviewed and revised the<br />
composition of its merchandise lineup, including increasing<br />
the percentage of women’s apparel and took steps to cut<br />
costs. However, because the g.u. brand is still not widely recognized,<br />
the company was unable to generate sufficient sales<br />
per store and reported an operating loss.<br />
Another noteworthy development during the fiscal year<br />
was the underwriting by the Group of a third-party placement<br />
of shares of VIEWCOMPANY, a company specializing in<br />
footwear for women. As a result, VIEWCOMPANY became a<br />
Group company accounted for under the equity method.<br />
Global Brand <strong>Operations</strong><br />
The Global Brand operations include Créations Nelson, which<br />
is developing the French casual brand COMPTOIR DES<br />
COTONNIERS and PETIT VEHICULE, which is developing the<br />
lingerie brand PRINCESSE TAM.TAM. Sales of the Group’s<br />
Global Brand business for the fiscal year under review were<br />
¥36.7 billion (an increase of 60.6% year on year), and operating<br />
income as a whole amounted to ¥7.2 billion (a gain of<br />
55.0% year on year). These gains were due to an increase of<br />
approximately 13%, in euro terms, of existing store sales of<br />
COMPTOIR DES COTONNIERS business and the consolidation<br />
of the results of PRINCESSE TAM.TAM business for the<br />
full fiscal year.<br />
LINK THEORY HOLDINGS CO.,LTD., a Group company<br />
accounted for under the equity method, wrote down the<br />
value of German company Rossner GmbH stock by ¥4.9 billion.<br />
As a result, the Group reported equity in losses of an<br />
affiliate (LINK THEORY HOLDINGS) accounted for under the<br />
equity method of ¥1.9 billion among operating expenses.<br />
48<br />
FAST RETAILING ANNUAL REPORT 2007<br />
3 Balance Sheets<br />
Total assets as of August 31, 2007, amounted to ¥359.7 billion,<br />
¥19.8 billion lower than at the end of the previous fiscal<br />
year. Within this total, current assets declined ¥32.3 billion, to<br />
¥217.9 billion, owing to a decrease in cash and marketable<br />
securities of ¥27.8 billion. The principal factors accounting for<br />
the decline in cash and deposits included the expenditure of<br />
¥13.1 billion for the purchase of shares of CABIN and ¥2.2<br />
billion for the acquisition of shares of VIEWCOMPANY and an<br />
increase in outlays of ¥18.8 billion because of a change in the<br />
timing of payment of corporate income taxes. Inventories<br />
rose ¥12.3 billion, with ¥8.9 billion of this increase accounted<br />
for by <strong>UNIQLO</strong> Japan operations and ¥2.3 billion due to<br />
<strong>UNIQLO</strong> International operations.<br />
Fixed assets rose ¥12.4 billion, to ¥141.7 billion. This was<br />
mainly because of the increase in tangible fixed assets of<br />
¥7.4 billion due to the rise in the number of <strong>UNIQLO</strong> stores.<br />
Total liabilities decreased ¥22.6 billion, to ¥116.4 billion.<br />
This was principally because of a decline in accrued income<br />
taxes of ¥15.9 billion compared with the end of the previous<br />
fiscal year.<br />
Net assets rose ¥2.8 billion, to ¥243.2 billion. Although dividend<br />
payments amounted to ¥13.7 billion, minority interests<br />
declined ¥9.1 billion, and net unrealized gains on hedge<br />
transactions were down ¥5.9 billion, these factors were offset<br />
by net income for the fiscal year of ¥31.7 billion.<br />
Net Assets and Equity Ratio<br />
� Net Assets<br />
� Equity Ratio<br />
(Billions of Yen) (%)<br />
140.5<br />
63.9<br />
161.4<br />
67.0<br />
182.3<br />
66.8<br />
240.5<br />
60.1<br />
243.2<br />
66.7<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Total Assets and<br />
Cash and Equivalents<br />
� Total Assets<br />
� Cash and Equivalents<br />
(Billions of Yen)<br />
219.9<br />
123.7<br />
240.9<br />
136.5<br />
272.8<br />
121.1<br />
379.7<br />
141.4<br />
359.7<br />
119.2<br />
FY ’03 ’04 ’05 ’06 ’07<br />
ROA and ROE<br />
� ROA � ROE<br />
(%)<br />
15.9<br />
9.7<br />
20.9<br />
20.8<br />
13.6<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Inventories<br />
(Billions of Yen)<br />
28.8<br />
19.7<br />
13.2<br />
33.6<br />
19.7<br />
12.4<br />
42.9<br />
13.6<br />
8.6<br />
55.1<br />
FY ’03 ’04 ’05 ’06 ’07
4 Cash Flows 5 Outlook for Fiscal 2008*<br />
Cash and equivalents (hereinafter referred to as “cash”) at the<br />
end of fiscal 2007 amounted to ¥119.2 billion, ¥22.1 billion<br />
lower than at the end of the previous fiscal year. The principal<br />
movements in cash flows were as follows:<br />
Net cash provided by operating activities fell ¥38.6 billion,<br />
to ¥18.8 billion. This was mainly due to ¥62.7 billion in<br />
income before income taxes and minority interests, income<br />
taxes paid of ¥55.9 billion, and an income tax refund of ¥12.7<br />
billion.<br />
Net cash used in investing activities amounted to ¥28.7 billion,<br />
¥13.1 billion lower than during the previous fiscal year.<br />
This was principally owing to investments in affiliated companies<br />
of ¥15.4 billion and purchases of tangible fixed assets<br />
amounting to ¥14.4 billion.<br />
Net cash used in financing activities totaled ¥12.7 billion<br />
(versus net cash provided by financing activities of ¥1.9 billion<br />
in the previous fiscal year), ¥14.6 billion lower than during the<br />
prior fiscal year. This was mainly due to dividends paid of<br />
¥13.7 billion.<br />
The Group’s policy for retained earnings and free cash flow<br />
will be to work to attain continuing stable growth through<br />
investments in M&A aimed at expanding Group business<br />
activities and other investments to strengthen the operating<br />
positions of Group companies.<br />
� Dividend Policy<br />
FAST RETAILING regards returning a portion of profits to its<br />
shareholders as one of its highest priorities and has adopted<br />
a basic policy of constantly working to improve Group performance<br />
and allocating an appropriate amount of profit,<br />
depending on performance, to shareholders on a continuing<br />
basis. FAST RETAILING’s policy is to pay cash dividends, in<br />
line with performance, after taking account of funds required<br />
for the expansion of the businesses of the Group and<br />
increasing profits as well as maintaining financial soundness.<br />
Operating Cash Flows and<br />
Capital Expenditures<br />
� Operating Cash Flows<br />
� Capital Expenditures<br />
(Billions of Yen)<br />
35.8<br />
11.6<br />
44.1<br />
11.2<br />
15.4<br />
11.7<br />
57.5<br />
16.3<br />
18.8 26.4<br />
FY ’03 ’04 ’05 ’06 ’07<br />
Dividend Payout Ratio<br />
(Consolidated)<br />
(%)<br />
27.1<br />
37.7<br />
39.0<br />
32.7<br />
41.7<br />
FY ’03 ’04 ’05 ’06 ’07<br />
For the fiscal year ending August 31, 2008, FAST RETAILING<br />
anticipates 8.5% growth in net sales, to ¥570.0 billion; a<br />
12.1% increase in operating income, to ¥72.8 billion; and<br />
22.1% growth in net income, to ¥38.8 billion. Net income per<br />
share is forecast to rise to ¥380.95, and plans call for paying<br />
a cash dividend of ¥130 per share (¥65 as an interim<br />
dividend and another ¥65 for the second half of the fiscal<br />
year).<br />
<strong>UNIQLO</strong> Japan <strong>Operations</strong><br />
<strong>UNIQLO</strong> anticipates 5.5% growth in sales, to ¥448.0 billion,<br />
and 10.9% expansion in operating income, to ¥71.0 billion.<br />
Sales of existing stores are forecast to decrease 1.0% but a<br />
rise is expected from the net addition of 37 directly-managed<br />
stores. <strong>UNIQLO</strong> plans to accelerate the openings of largeformat<br />
stores with sales floor space of 1,600 square meters.<br />
Along with this increase in the number of larger stores,<br />
<strong>UNIQLO</strong> will focus on the development of products for these<br />
stores and, at the same time, will work to achieve greater efficiency<br />
in the operation of these stores to make them just as<br />
efficient and profitable as existing standard stores.<br />
In addition, by strengthening coordination between sales<br />
and production, <strong>UNIQLO</strong> will endeavor to control discount<br />
rates and is anticipating a modest improvement in the gross<br />
profit margin. Moreover, <strong>UNIQLO</strong> plans to continue to pursue<br />
low-cost management through sufficient regard for cost<br />
effectiveness.<br />
<strong>UNIQLO</strong> International <strong>Operations</strong><br />
<strong>UNIQLO</strong> is forecasting a 76.5% rise in sales in its operations<br />
overseas, to ¥30.0 billion. <strong>UNIQLO</strong> will continue to develop<br />
its global flagship stores in the fashion cities of Europe and<br />
the United States and consolidate its brand position in world<br />
markets. Going forward, <strong>UNIQLO</strong> plans to open new stores<br />
aggressively in the rest of Asia where high profitability is<br />
expected, secure additional sales and income, and expand<br />
the <strong>UNIQLO</strong> business around the world.<br />
Japan Apparel <strong>Operations</strong><br />
Growth in sales of about 2.1%, to ¥47.0 billion, is expected<br />
for the Japan Apparel operations of the FAST RETAILING<br />
Group. Management reforms will be implemented to increase<br />
the profitability of the CABIN, G.U., and ONEZONE businesses.<br />
The know-how developed in the Group’s <strong>UNIQLO</strong> operations,<br />
including highly efficient store management, systems<br />
for offering high-quality products in a timely way, new store<br />
development, and low-cost management will be made available<br />
to these Group businesses to assist them in establishing<br />
efficient management foundations and make an early move<br />
onto the path to growth.<br />
*As of October 2007<br />
FAST RETAILING ANNUAL REPORT 2007 49
1. Consolidated Outlook for Fiscal Year Ending<br />
August 31, 2008<br />
Billions % First % Second %<br />
of Yen Annual Change Half Change Half Change<br />
Net sales ¥570.0 +8.5 ¥304.3 +7.1 ¥265.7 +10.2<br />
Gross profit 273.6 +10.2 145.0 +10.2 128.6 +10.2<br />
SG&A 200.8 +9.5 99.1 +12.0 101.7 +7.1<br />
Operating income 72.8 +12.1 45.9 +6.4 26.9 +23.4<br />
Net income 38.8 +22.1 24.8 +9.5 14.0 +53.8<br />
2. Outlook of Number of Stores Opened and Closed<br />
by Business<br />
50<br />
2007 2008<br />
End Net End<br />
Aug. Open Close Increase Aug.<br />
<strong>UNIQLO</strong> 787 103 48 +55 842<br />
<strong>UNIQLO</strong> Japan: 748 85 47 +38 786<br />
Directly-managed 730 84 47 +37 767<br />
Franchise 18 1 0 +1 19<br />
<strong>UNIQLO</strong> International: 39 18 1 +17 56<br />
U.K. 11 2 0 +2 13<br />
China 9 6 1 +5 14<br />
U.S. 1 0 0 0 1<br />
South Korea 14 6 0 +6 20<br />
Hong Kong 4 3 0 +3 7<br />
France 0 1 0 +1 1<br />
CABIN 211 10 10 0 211<br />
G.U. 50 7 0 +7 57<br />
ONEZONE 332 20 30 (10) 322<br />
ASPESI 12 0 1 (1) 11<br />
COMPTOIR DES COTONNIERS 305 49 3 +46 351<br />
PRINCESS TAM.TAM 131 22 0 +22 153<br />
Total 1,828 211 92 +119 1,947<br />
3. Outlook of Sales by Group Operation<br />
y/y<br />
Billions of Yen 2008 2007 Difference (%)<br />
<strong>UNIQLO</strong> Japan:<br />
Net sales ¥448.0 ¥424.7 ¥23.3 +5.5<br />
Operating income 71.0 64.0 7.0 +10.9<br />
<strong>UNIQLO</strong> International:<br />
Net sales 30.0 16.9 13.1 +76.5<br />
Operating loss (0.4) (1.1) 0.7 —<br />
Japan Apparel <strong>Operations</strong>:<br />
Net sales 47.0 46.0 1.0 +2.1<br />
Operating loss (1.7) (3.5) 1.8 —<br />
Global Brand <strong>Operations</strong>:<br />
Net sales 43.0 36.7 6.3 +16.4<br />
Operating income 7.4 7.2 0.2 +3.2<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Global Brand <strong>Operations</strong><br />
In fiscal 2008, growth of 16.4%, to ¥43.0 billion, is expected<br />
in the Group’s Global Brand operations. In the COMPTOIR<br />
DES COTONNIERS business, which is expanding steadily,<br />
plans call for aggressively opening new stores outside France<br />
in other EU countries and accelerating the global development<br />
of this brand. In the PRINCESSE TAM.TAM business,<br />
we will strengthen the sales network, focusing principally on<br />
France.<br />
In all of the Group’s businesses, we will pursue measures<br />
to strengthen Group management and expand operations<br />
globally. Along with these activities, we will work to consolidate<br />
business bases in the world’s principal cities, accelerate<br />
growth going forward, and attain the objective of being a<br />
highly profitable apparel retailing group.<br />
Consolidated Subsidiaries<br />
Share<br />
Consolidated Subsidiaries Ownership* 1<br />
<strong>UNIQLO</strong> Business<br />
<strong>UNIQLO</strong> CO., LTD. Japan 100.0%<br />
<strong>UNIQLO</strong>(U.K.)LTD.<br />
FAST RETAILING (JIANGSU)<br />
U.K. 100.0%<br />
APPAREL CO., LTD. China 71.4%* 2<br />
FAST RETAILING(CHINA)<br />
TRADING CO., LTD. China 100.0%<br />
<strong>UNIQLO</strong> USA, Inc. U.S. 100.0%<br />
FRL Korea Co., Ltd. South Korea 51.0%<br />
<strong>UNIQLO</strong> HONG KONG, LIMITED<br />
Non-<strong>UNIQLO</strong> Business<br />
Hong Kong 100.0%<br />
ONEZONE CORPORATION Japan 100.0%<br />
FR FRANCE S.A.S. France 100.0%<br />
Créations Nelson S.A.S. France 99.9%<br />
PETIT VEHICULE S.A.S. France 95.0%<br />
<strong>UNIQLO</strong> FRANCE S.A.S. France 100.0%<br />
ASPESI Japan Co., Ltd. Japan 60.0%<br />
CABIN CO., LTD. Japan 93.9%* 3<br />
G.U. CO., LTD.<br />
Equity-Method Affiliated:<br />
Japan 100.0%<br />
LINK THEORY HOLDINGS CO.,LTD. Japan 33.9%<br />
VIEWCOMPANY CO.,LTD. Japan 33.4%<br />
*1: Percentage ownership as of August 31, 2007<br />
*2: Percentage ownership of voting shares: 83.3%<br />
*3: Percentage ownership of voting shares: 96.9%
6 Risk Factors<br />
Management regards the following to be the principal risk<br />
factors associated with the business of FAST RETAILING and<br />
other members of the Group that could have a material<br />
impact on the decisions of investors. Management engages<br />
in rigorous risk avoidance and risk management in recognition<br />
of the possibility of these risks and strives to respond<br />
appropriately should any of these risks arise.<br />
(1) Risks associated with the implementation of<br />
corporate strategy<br />
(a) Corporate acquisition risk<br />
The Group engages in M&A activities as one of its management<br />
strategies for the expansion of its operations. Through<br />
these activities, the Group seeks to pursue synergies with<br />
companies and operations that are the objectives of its M&A<br />
activities and optimize its business portfolio, thereby aiming<br />
to maximize the Group’s business value. However, in cases<br />
where the Group is unable to realize the expected profit and<br />
benefits of M&A activities, this could have an adverse impact<br />
on business results.<br />
(b) Management personnel risk<br />
Among members of the Group’s management team, including<br />
Tadashi Yanai, Chairman, President & CEO, each has a<br />
major role to play in his/her respective areas of responsibility.<br />
In the event that any member of management becomes<br />
unable to fulfill his/her duties, this could have an adverse<br />
impact on business results.<br />
(c) Competitive risk<br />
In each of its businesses, the customers of the Group are<br />
consumers who are always highly discriminating about merchandise,<br />
services, and price, and the Group engages in<br />
tough competition with other companies in its industry in<br />
Japan. In the event that the relative competitive strength of<br />
the Group deteriorates, this could have an adverse impact on<br />
business results.<br />
(d) Risk of reliance on certain regions for production<br />
The largest percentage of merchandise sold in <strong>UNIQLO</strong> business<br />
operations, which are the core activity of the Group, is<br />
manufactured in China and other countries in Asia and then<br />
imported. For this reason, in the event that major changes<br />
occur in the political, economic, and/or legal environment or<br />
natural disasters are experienced in China and other producing<br />
countries, this could have an adverse impact on business<br />
results.<br />
(e) Risk of <strong>UNIQLO</strong> operations outside Japan<br />
The Group is developing its business activities through M&A<br />
and actively expanding its <strong>UNIQLO</strong> operations overseas (in<br />
the United Kingdom, mainland China, including Hong Kong,<br />
the United States, Korea, and France). At present, the overseas<br />
operations of <strong>UNIQLO</strong> account for only a relatively small<br />
percentage of consolidated net sales, but, going forward, the<br />
Group will establish additional flagship stores in countries<br />
overseas and increase the number of other stores as well as<br />
set up <strong>UNIQLO</strong> operations in additional countries.<br />
Accordingly, the ratio of <strong>UNIQLO</strong>’s overseas sales to its net<br />
sales is believed likely to rise. Along with this trend, if the<br />
Group is unable to deal with the uncertainties of changes in<br />
market needs and product trends in these overseas markets<br />
or if economic fluctuations occur, political and social conditions<br />
become turbulent, or changes occur in legal regulations<br />
and/or other conditions, these circumstances could have an<br />
adverse impact on business results.<br />
(f) Foreign currency risk<br />
The majority of the product imports of the <strong>UNIQLO</strong> business,<br />
which is the Group’s core business, are denominated in U.S.<br />
dollars. The Group has concluded forward foreign exchange<br />
contracts to cover imports for the coming three years<br />
approximately and, therefore, by locking in the foreign<br />
exchange rate for its imports, endeavors to stabilize its procurement<br />
costs. However, if there is a major trend toward a<br />
weaker yen and a stronger U.S. dollar and this trend persists<br />
for a prolonged period, this could have an adverse impact on<br />
business results.<br />
(2) General business risks<br />
The Group recognizes the following risks associated with the<br />
management and conduct of operations: (a) risk of product<br />
liability, (b) risk of leakage of personal information, (c) risk of<br />
weather conditions, (d) risk of disasters, (e) risk of disputes<br />
and lawsuits, and (f) risk of changes in economic conditions<br />
and consumption trends.<br />
FAST RETAILING ANNUAL REPORT 2007 51
Consolidated Balance Sheets<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
August 31, 2007 and 2006<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars (note 1)<br />
ASSETS 2007 2006 2007<br />
Current assets:<br />
Cash (note 3) ¥064,091 ¥121,950 $0,552,175<br />
Marketable securities (notes 3 and 4) 55,237 25,237 475,894<br />
Trade notes and accounts receivable 9,849 8,397 84,854<br />
Less—Allowance for doubtful accounts (110) (128) (948)<br />
Net trade receivables 9,739 8,269 83,906<br />
Inventories 55,173 42,862 475,342<br />
Deferred tax assets (note 5) 1,752 928 15,094<br />
Income tax refund receivable 5,837 12,793 50,289<br />
Exchange rate forward contracts 17,514 27,695 150,892<br />
Other 8,635 10,592 74,395<br />
Total current assets<br />
Fixed assets:<br />
Property and equipment:<br />
217,978 250,326 1,877,987<br />
Land 3,980 4,299 34,290<br />
Buildings and structures 50,652 41,555 436,392<br />
Furniture and equipment 4,719 3,302 40,657<br />
Construction in progress 2,117 761 18,239<br />
Total 61,468 49,917 529,578<br />
Less—Accumulated depreciation (24,129) (20,024) (207,883)<br />
Net property and equipment 37,339 29,893 321,695<br />
Intangible assets:<br />
Goodwill 32,536 32,997 280,314<br />
Other 10,466 8,225 90,170<br />
Total intangible assets 43,002 41,222 370,484<br />
Investments and other assets:<br />
Investments in securities (note 4) 907 1,146 7,814<br />
Investments in subsidiaries and affiliates (note 4) 5,817 6,626 50,116<br />
Lease deposits 34,196 29,639 294,615<br />
Construction assistance fund receivables 19,169 20,288 165,150<br />
Deferred tax assets (note 5) 684 552 5,893<br />
Other 1,455 975 12,536<br />
Less—Allowance for doubtful accounts (777) (1,012) (6,694)<br />
Total investments and other assets 61,451 58,214 529,430<br />
Total fixed assets 141,792 129,329 1,221,609<br />
Total assets ¥359,770 ¥379,655 $3,099,596<br />
See accompanying notes to consolidated financial statements.<br />
52<br />
FAST RETAILING ANNUAL REPORT 2007
Thousands of<br />
Millions of Yen U.S. Dollars (note 1)<br />
LIABILITIES 2007 2006 2007<br />
Current liabilities:<br />
Accounts payable ¥040,568 ¥042,794 $0,349,513<br />
Portion of long-term debt due within one year (note 6) 4,484 — 38,632<br />
Accrued income taxes (note 5) 14,393 30,340 124,003<br />
Deferred tax liabilities (note 5) 4,499 8,047 38,761<br />
Other 26,614 31,311 229,293<br />
Total current liabilities 90,558 112,492 780,202<br />
Long-term liabilities:<br />
Long-term debt (note 6) 19,432 19,584 167,416<br />
Accrued retirement and severance obligations (note 7) 393 437 3,386<br />
Other 6,104 6,662 52,588<br />
Net assets:<br />
Total long-term liabilities 25,929 26,683 223,390<br />
Total liabilities 116,487 139,175 1,003,592<br />
Capital (note 8) 10,274 10,274 88,516<br />
Additional paid-in capital (note 8) 4,999 4,999 43,069<br />
Retained earnings (note 9) 228,958 211,135 1,972,586<br />
Treasury stock, at cost (note 10) (15,546) (15,540) (133,936)<br />
Net unrealized holding gains (losses) on securities 369 465 3,179<br />
Net unrealized gains on hedge transactions 10,393 16,385 89,541<br />
Foreign currency translation adjustments 697 509 6,005<br />
Minority interests 3,139 12,253 27,044<br />
Total net assets 243,283 240,480 2,096,004<br />
Commitments and contingencies (note 12)<br />
Total liabilities and net assets ¥359,770 ¥379,655 $3,099,596<br />
FAST RETAILING ANNUAL REPORT 2007 53
Consolidated Statements of Income<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
For the Years Ended August 31, 2007, 2006 and 2005<br />
Thousands of<br />
Millions of Yen U.S. Dollars (note 1)<br />
2007 2006 2005 2007<br />
Net sales ¥525,203 ¥448,819 ¥383,973 $4,524,882<br />
Cost of sales 276,808 236,401 213,683 2,384,837<br />
Gross profit 248,395 212,418 170,290 2,140,045<br />
Selling, general and administrative expenses (note 13) 183,432 142,063 113,598 1,580,357<br />
Operating income 64,963 70,355 56,692 559,688<br />
Other income (expenses):<br />
Interest and dividend income<br />
Equity in income (losses) of affiliates accounted<br />
1,314 1,045 790 11,321<br />
for under equity method, net (2,078) 274 1,086 (17,903)<br />
Foreign currency exchange gain 1,884 1,805 374 16,232<br />
Gain on sales of investments in securities 98 578 — 844<br />
Interest expenses (1,775) (854) (344) (15,292)<br />
Gain on change in shares of an affiliated company — — 2,612 —<br />
Gain on forgiveness of subsidiary debt — 837 3,212 —<br />
Gain on sales of fixed assets 1,409 — — 12,139<br />
Reversal of allowance for doubtful accounts 209 203 — 1,801<br />
Loss on revaluation of inventories — — (1,599) —<br />
Loss on disposal of fixed assets (650) (861) (244) (5,600)<br />
Impairment loss (note 14) (2,118) (228) — (18,248)<br />
Loss on closure of stores (467) (193) (351) (4,023)<br />
Loss on termination of leases — (202) — —<br />
Amortization of consolidation adjustment account — — (4,236) —<br />
Other, net (76) (7) 23 (655)<br />
Total (2,250) 2,397 1,323 (19,384)<br />
Income before income taxes and minority interests 62,713 72,752 58,015 540,304<br />
Income taxes (note 5):<br />
Current 31,145 32,613 23,411 268,329<br />
Deferred (371) (1,680) 647 (3,196)<br />
Total 30,774 30,933 24,058 265,133<br />
Minority interests 164 1,382 73 1,413<br />
Net income ¥031,775 ¥040,437 ¥033,884 $0,273,757<br />
See accompanying notes to consolidated financial statements.<br />
54<br />
FAST RETAILING ANNUAL REPORT 2007
Consolidated Statements of Changes in Net Assets<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
For the Years Ended August 31, 2007, 2006 and 2005<br />
Millions of Yen<br />
Net Net<br />
unrealized unrealized Foreign<br />
Additional Treasury holding gains gains (losses) currency<br />
paid-in Retained stock, (losses) on on hedge translation Minority<br />
Capital capital earnings at cost securities transactions adjustments interests Total<br />
Balance at August 31, 2004 ¥10,274 ¥4,579 ¥163,982 ¥(16,035) ¥(1,352) ¥000,— ¥ (14) ¥000,— ¥161,434<br />
Net income — — 33,884 — — — — — 33,884<br />
Cash dividends (note 9) — — (13,223) — — — — — (13,223)<br />
Directors’ bonuses (note 9)<br />
Increase in treasury stock<br />
— — (350) — — — — — (350)<br />
(note 10) — — — (6) — — — — (6)<br />
Net change during the year — — — — 676 — (66) 5,146 5,756<br />
Balance at August 31, 2005<br />
Effect of newly consolidated<br />
10,274 4,579 184,293 (16,041) (676) — (80) 5,146 187,495<br />
subsidiaries — — (254) — — — — — (254)<br />
Net income — — 40,437 — — — — — 40,437<br />
Cash dividends (note 9) — — (13,225) — — — — — (13,225)<br />
Directors’ bonuses (note 9)<br />
Increase in treasury stock<br />
— — (116) — — — — — (116)<br />
(note 10)<br />
Decrease in treasury stock<br />
— — — (4) — — — — (4)<br />
(note 10) — 420 — 505 — — — — 925<br />
Net change during the year — — — — 1,141 16,385 589 7,107 25,222<br />
Balance at August 31, 2006<br />
Effect of newly consolidated<br />
10,274 4,999 211,135 (15,540) 465 16,385 509 12,253 240,480<br />
subsidiaries — — (203) — — — — — (203)<br />
Net income — — 31,775 — — — — — 31,775<br />
Cash dividends (note 9)<br />
Increase in treasury stock<br />
— — (13,749) — — — — — (13,749)<br />
(note 10)<br />
Decrease in treasury stock<br />
— — — (6) — — — — (6)<br />
(note 10) — 0 — 0 — — — — 0<br />
Net change during the year — — — — (96) (5,992) 188 (9,114) (15,014)<br />
Balance at August 31, 2007 ¥10,274 ¥4,999 ¥228,958 ¥(15,546) ¥(0,369 ¥10,393 ¥697 ¥03,139 ¥243,283<br />
Thousands of U.S. Dollars (note 1)<br />
Net Net<br />
unrealized unrealized Foreign<br />
Additional Treasury holding gains gains (losses) currency<br />
paid-in Retained stock, (losses) on on hedge translation Minority<br />
Capital capital earnings at cost securities transactions adjustments interests Total<br />
Balance at August 31, 2006<br />
Effect of newly consolidated<br />
$88,516 $43,069 $1,819,032 $(133,885) $4,006 $141,165 $4,385 $105,566 $2,071,854<br />
subsidiaries — — (1,749) — — — — — (1,749)<br />
Net income — — 273,757 — — — — — 273,757<br />
Cash dividends (note 9)<br />
Increase in treasury stock<br />
— — (118,454) — — — — — (118,454)<br />
(note 10)<br />
Decrease in treasury stock<br />
— — — (51) — — — — (51)<br />
(note 10) — 0 — 0 — — — — 0<br />
Net change during the year — — — — (827) (51,624) 1,620 (78,522) (129,353)<br />
Balance at August 31, 2007 $88,516 $43,069 $1,972,586 $(133,936) $3,179 $089,541 $6,005 $027,044 $2,096,004<br />
See accompanying notes to consolidated financial statements.<br />
Beginning with the fiscal year ended August 31, 2006, minority interests have been included in net assets.<br />
FAST RETAILING ANNUAL REPORT 2007 55
Consolidated Statements of Cash Flows<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
For the Years Ended August 31, 2007, 2006 and 2005<br />
Thousands of<br />
Millions of Yen U.S. Dollars (note 1)<br />
2007 2006 2005 2007<br />
Cash flows from operating activities:<br />
Income before income taxes and minority interests<br />
Adjustments to reconcile income before income taxes and<br />
minority interests to net cash provided by operating activities:<br />
¥062,713 ¥072,752 ¥058,015 $0,540,303<br />
Depreciation and amortization 6,567 5,364 3,681 56,578<br />
Impairment loss 2,118 228 — 18,248<br />
Amortization of goodwill<br />
Equity in (income) losses of affiliates accounted for<br />
4,254 1,150 4,254 36,650<br />
under equity method, net 2,078 (274) (1,086) 17,903<br />
Gain on change in shares of an affiliated company — — (2,612) —<br />
Decrease in allowance for doubtful accounts<br />
Increase (decrease) in accrued retirement<br />
(263) (248) (158) (2,266)<br />
and severance obligations (55) 79 (11) (474)<br />
Interest and dividend income (1,314) (1,045) (790) (11,321)<br />
Interest expenses 1,775 853 344 15,292<br />
Foreign currency exchange gain (608) (160) (40) (5,238)<br />
Loss on disposal of fixed assets 650 861 244 5,600<br />
Gain on sales of fixed assets (1,409) — — (12,139)<br />
Gain on forgiveness of subsidiary debt — (837) (3,212) —<br />
Increase in trade receivables (1,132) (2,108) (626) (9,753)<br />
(Increase) decrease in inventories (11,809) (4,465) 1,456 (101,740)<br />
(Increase) decrease in other assets 6,408 (152) (163) 55,208<br />
Increase (decrease) in trade payables (2,529) 4,368 (15,669) (21,789)<br />
Increase (decrease) in other liabilities (4,243) 5,858 (1,487) (36,556)<br />
Bonuses to directors (175) (116) (350) (1,508)<br />
Other (163) 85 250 (1,404)<br />
Total 62,863 82,193 42,040 541,594<br />
Interest and dividend received 1,365 1,045 885 11,760<br />
Interest paid (1,700) (756) (327) (14,646)<br />
Repayments of debt associated with reorganizing subsidiary (482) (609) (380) (4,153)<br />
Income taxes paid (55,993) (24,396) (26,820) (482,407)<br />
Income taxes refund 12,794 — — 110,227<br />
Net cash provided by operating activities<br />
Cash flows from investing activities:<br />
18,847 57,477 15,398 162,375<br />
Net decrease (increase) in time deposits 16 (73) — 138<br />
Purchase of investment securities (181) — (1,000) (1,559)<br />
Proceeds from redemption of securities 6,172 1,000 — 53,175<br />
Investments in subsidiaries (15,400) (20,744) (1,604) (132,679)<br />
Acquisition of newly consolidated subsidiaries<br />
Proceeds from acquisition of newly<br />
— (9,688) (6,211) —<br />
consolidated subsidiaries — — 2,387 —<br />
Purchase of debt — — (2,560) —<br />
Purchase of property and equipment (14,427) (8,716) (3,577) (124,296)<br />
Proceeds from sale of property and equipment 2,271 222 76 19,566<br />
Payments for lease deposits (7,414) (3,105) (3,908) (63,875)<br />
Collections of lease deposits 2,830 1,393 1,219 24,382<br />
Payments for construction assistance fund receivables (1,112) (2,316) (2,919) (9,580)<br />
Collections of construction assistance fund receivables 2,231 1,802 1,744 19,221<br />
Purchase of intangible assets (3,487) (2,123) (918) (30,042)<br />
Other, net (282) 441 448 (2,430)<br />
Net cash used in investing activities<br />
Cash flows from financing activities:<br />
(28,783) (41,907) (16,823) (247,979)<br />
Net increase (decrease) in short-term debt (169) 291 — (1,456)<br />
Proceeds from long-term debt 3,844 15,432 13 33,118<br />
Repayments of long-term debt (3,308) (1,624) (19) (28,500)<br />
Repayments of bonds — — (1,616) —<br />
Proceeds from (payment for) treasury stocks, net (6) 920 (5) (52)<br />
Dividends paid (13,747) (13,223) (13,219) (118,437)<br />
Other 627 136 (8) 5,402<br />
Net cash provided by (used in) financing activities (12,759) 1,932 (14,854) (109,925)<br />
Effect of exchange rate changes on cash and equivalents 153 1,454 908 1,318<br />
Net change in cash and equivalents (22,542) 18,956 (15,371) (194,211)<br />
Cash and equivalents at beginning of year (note 3) 141,404 121,061 136,461 1,218,265<br />
Cash and equivalents of newly consolidated subsidiaries 354 1,387 — 3,050<br />
Cash and equivalents of deconsolidated subsidiaries — — (29) —<br />
Cash and equivalents at end of year (note 3)<br />
See accompanying notes to consolidated financial statements.<br />
¥119,216 ¥141,404 ¥121,061 $1,027,104<br />
56<br />
FAST RETAILING ANNUAL REPORT 2007
Notes to Consolidated Financial Statements<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries<br />
1<br />
Basis of Presentation and Financial<br />
Statement Translation<br />
(a) Basis of Presentation<br />
The accompanying consolidated financial statements of<br />
FAST RETAILING CO., LTD. (“the Company”) and its consolidated<br />
subsidiaries are prepared on the basis of accounting<br />
principles generally accepted in Japan, which are different in<br />
certain respects as to the application and disclosure requirements<br />
of International Financial Reporting Standards, and are<br />
compiled from the consolidated financial statements prepared<br />
by the Company as required by the Securities and<br />
Exchange Law of Japan. The accounts of overseas subsidiaries<br />
and the other affiliates are based on their accounting<br />
records maintained in conformity with generally accepted<br />
accounting principles prevailing in the respective country of<br />
domicile. In addition, for the convenience of readers outside<br />
Japan, the accompanying consolidated financial statements,<br />
including the notes thereof, have been reclassified and contain<br />
additional information which is not required under<br />
accounting principles generally accepted in Japan.<br />
(b) Basis of Financial Statement Translation<br />
The accompanying consolidated financial statements are<br />
expressed in yen, and, solely for the convenience of the reader,<br />
have been translated into United States (U.S.) dollars at<br />
the rate of ¥116.07=$1, the approximate exchange rate prevailing<br />
on the Tokyo Foreign Exchange Market as of August<br />
31, 2007. This translation should not be construed as a presentation<br />
that any amounts shown could be converted into<br />
U.S. dollars.<br />
2<br />
Basis of Consolidation and Summary<br />
of Significant Accounting Policies<br />
(a) Basis of Consolidation<br />
The consolidated financial statements include the accounts of<br />
the Company and the following 21 subsidiaries (19 in 2006)<br />
over which the Company has power of control through substantial<br />
ownership of majority voting rights.<br />
G.U. CO., LTD. and FAST RETAILING (CHINA) TRADING<br />
CO., LTD. have been included within the scope of consolidation<br />
from the fiscal year ended August 31, 2007.<br />
Ownership<br />
Percentage<br />
Major Consolidated Subsidiaries 2007 2006<br />
<strong>UNIQLO</strong> CO., LTD. 100% 100%<br />
<strong>UNIQLO</strong> (U.K.) LTD. 100% 100%<br />
FAST RETAILING (JIANGSU) APPAREL CO., LTD. 83% 83%<br />
FAST RETAILING (CHINA) TRADING CO., LTD. 100% —<br />
<strong>UNIQLO</strong> USA, Inc. 100% 100%<br />
FRL Korea Co., Ltd. 51% 51%<br />
<strong>UNIQLO</strong> HONG KONG, LIMITED 100% 100%<br />
ONEZONE CORPORATION 100% 100%<br />
COMPTOIR DES COTONNIERS JAPAN CO., LTD. 100% 100%<br />
ASPESI Japan Co., Ltd. 60% 60%<br />
GLOBAL RETAILING CO., LTD. 100% 100%<br />
GLOBAL INVESTMENT CO., LTD. 100% 100%<br />
FR FRANCE S.A.S. 100% 100%<br />
Créations Nelson S.A.S. 100% 100%<br />
<strong>UNIQLO</strong> FRANCE S.A.S. 100% 100%<br />
PETIT VEHICULE S.A.S. 95% 95%<br />
CABIN CO., LTD. 97% 52%<br />
G.U. CO., LTD. 100% 100%<br />
The consolidated financial statements of the Company as<br />
of and for the years ended August 31, 2007 include accounts<br />
of FAST RETAILING (JIANGSU) APPAREL CO., LTD., FAST<br />
RETAILING (CHINA) TRADING CO., LTD. and PETIT<br />
VEHICULE S.A.S. as of June 30. Significant transactions,<br />
which would materially affect the Company’s consolidated<br />
financial position and results of operations, with these subsidiaries<br />
during the period from July 1 to August 31 have<br />
been adjusted for the Company’s consolidation purposes.<br />
CABIN CO., LTD. changed its fiscal year-end, February 28<br />
to August 31 in order to correspond with the Company.<br />
LINK THEORY HOLDINGS CO., LTD. and VIEWCOMPANY<br />
CO., LTD. have been accounted for using the equity method.<br />
The Company purchased shares of VIEWCOMPANY CO.,<br />
LTD. in November 2006 and it has been accounted for under<br />
the equity method from the fiscal year ended August 31,<br />
2007. VIEWCOMPANY closes its accounts on February 20,<br />
and, since the time between VIEWCOMPANY’s closing of<br />
accounts is more than three months from the time of the<br />
Company’s closing of accounts, figures based on a provisional<br />
closing of accounts covering the period from<br />
November 21, 2006 through August 20, 2007 have been<br />
used in preparing the consolidated accounts.<br />
The Company does not consolidate with respect to the<br />
Company’s two other subsidiaries and one other affiliate, as<br />
the Company determined those companies to be insignificant,<br />
individually and in the aggregate, to total assets, revenue,<br />
net income and retained earnings of the accompanying<br />
consolidated financial statements.<br />
FAST RETAILING ANNUAL REPORT 2007 57
All the significant intercompany accounts and transactions<br />
have been eliminated in consolidation.<br />
All the assets and liabilities of newly consolidated subsidiaries<br />
are evaluated at fair value.<br />
(b) Cash and Equivalents<br />
For the purpose of consolidated statements of cash flows,<br />
the Company considers all highly liquid investments with<br />
insignificant risk of changes in value, with maturities of<br />
generally three months or less when purchased, to be cash<br />
equivalents.<br />
(c) Short-term Investments and Investments in Securities<br />
In accordance with “Accounting Standards for Financial<br />
Instruments” of the Business Accounting Deliberation Council<br />
(“the BADC”), securities other than investments in an affiliated<br />
company are classified into one of the following three categories,<br />
and the Company accounts for the securities as follows:<br />
• Trading securities, which are debt and equity securities that<br />
the Company holds for the purpose of earning profits on<br />
short-term movement of the fair market values, are reported<br />
at fair market value, with unrealized holding gains and<br />
losses included in earnings.<br />
• Held-to-maturity securities, which are debt securities that<br />
the Company has the positive intent and ability to hold to<br />
maturity, are reported at amortized cost.<br />
• Available-for-sale securities, which are debt and equity<br />
securities with fair market values that are classified as neither<br />
trading securities nor held-to-maturity securities, are<br />
reported at fair market value. Unrealized holding gains and<br />
losses on available-for-sale securities are excluded from<br />
earnings and are reported as a net unrecognized holding<br />
gain or loss, net of the related tax effect, in a separate component<br />
of net assets until realized. In computing the realized<br />
gain or loss, costs of available-for-sale securities are<br />
principally determined by the average method.<br />
Held-to-maturity securities and available-for-sale securities<br />
with no fair market value are carried at cost.<br />
Investments in unconsolidated subsidiaries and the other<br />
affiliates that are not accounted for under the equity method<br />
are reported at cost determined by the average method.<br />
(d) Allowance for Doubtful Accounts<br />
An allowance for doubtful accounts, including trade notes<br />
and accounts receivable and certain investments and other<br />
assets, is provided against probable future losses on collection.<br />
The Company and subsidiaries designate certain<br />
accounts as highly doubtful accounts and provide a specific<br />
allowance for these accounts based on the management’s<br />
detailed credit analysis. Other than these accounts, the<br />
Company provides an allowance for doubtful accounts based<br />
on the Company’s historical average charge-off ratio.<br />
58<br />
FAST RETAILING ANNUAL REPORT 2007<br />
(e) Inventories<br />
Most inventories are stated at cost. The cost is mainly determined<br />
by the specific identification method.<br />
(f) Property and Equipment<br />
Property and equipment is stated at cost. Depreciation is<br />
computed by the declining-balance method for the Company<br />
and its certain domestic subsidiaries except for the buildings<br />
acquired by certain domestic subsidiaries after April 1, 1998<br />
for which the straight-line method is used. Depreciation is<br />
computed principally by the straight-line method for overseas<br />
subsidiaries. The ranges of principal estimated useful lives are<br />
as follows:<br />
Buildings and structures 8 to 50 years<br />
Furniture, equipment and vehicles 5 to 8 years<br />
(g) Intangible Assets<br />
Goodwill is amortized on a straight-line basis over their<br />
respective estimated useful lives, not exceeding 20 years,<br />
unless it is deemed insignificant.<br />
Software for internal use is amortized on a straight-line<br />
method over 3 to 5 years of the estimated available period.<br />
(h) Retirement and Severance Benefits<br />
The Company and certain subsidiaries in Japan have defined<br />
contribution plans.<br />
Certain other domestic subsidiaries have defined benefit<br />
plans for the employees’ retirement and severance. Accrued<br />
retirement and severance obligations under the defined benefit<br />
plans are provided based on estimated projected benefit<br />
obligation and plan assets at the end of the fiscal year.<br />
Actuarial gains and losses are recognized as income or<br />
expense on a straight-line basis over certain years, beginning<br />
with the next fiscal year of occurrence, principally over seven<br />
years, not exceeding the expected average remaining working<br />
lives of the employees participating in the plans.<br />
(i) Leases<br />
“Accounting Standards for Leases” of the BADC permits<br />
lessees to account for as operating leases as to finance leases<br />
without transfer of ownership of leased assets from the<br />
lessor to the lessee, while it requires that finance leases<br />
resulting in the transfer of the ownership by the end of the<br />
lease term shall be accounted for as capital leases by recognizing<br />
assets and the corresponding obligation on the<br />
lessee’s balance sheet. All finance leases of the Company<br />
and subsidiaries in Japan are accounted for as operating<br />
leases, and the lease payment is expensed over the lease<br />
term as it becomes payable. Leases of overseas subsidiaries<br />
are accounted for as capital leases.<br />
(j) Revenue Recognition<br />
The Company and subsidiaries recognize sales revenue upon<br />
the sale of merchandise to customers where the title of the<br />
merchandise transfers to the customers.
(k) Foreign Currency Translation<br />
Foreign currency transactions are translated into yen on the<br />
basis of the rates in effect at the transaction date or, if only<br />
the relation between foreign currency transactions and related<br />
firm forward exchange contracts meets the criteria of<br />
hedge accounting as regulated in “Accounting Standards for<br />
Financial Instruments” of the BADC, those covered by firm<br />
forward exchange contracts can be translated at such contract<br />
rates. At year-end, monetary assets and liabilities<br />
denominated in foreign currencies are translated into yen at<br />
the rates of exchange in effect at the balance sheet date,<br />
except for those, as described above, translated at related<br />
contract rates. Gains or losses resulting from the translation<br />
of foreign currencies, including gains and losses on settlement,<br />
are credited or charged to income as incurred.<br />
The financial statements of the consolidated overseas subsidiaries<br />
are translated into the reporting currency or yen.<br />
All assets and liabilities are translated at the rates of<br />
exchange in effect at the balance sheet date.<br />
Shareholders’ equity accounts are translated at historical<br />
rates.<br />
The income and expenses of consolidated overseas subsidiaries<br />
were converted using the exchange rates prevailing<br />
on the date of the closing of accounts, but the average<br />
exchange rate for the period has been used from the fiscal<br />
year ended August 31, 2007, aiming to increase the accuracy<br />
of its subsidiaries’ financial results in the consolidated<br />
financial statements.<br />
A comprehensive adjustment resulting from translation of<br />
assets, liabilities, and net assets is reported as foreign<br />
currency translation adjustments, a separate component of<br />
net assets.<br />
(l) Derivative Financial Instruments<br />
and Hedge Accounting<br />
In principle, net assets and liabilities arising from derivative<br />
financial transactions are measured at fair value, with the<br />
unrealized gain or loss included in earnings. Hedging transactions<br />
that meet the criteria of hedge accounting as regulated<br />
in “Accounting Standards for Financial Instruments” of the<br />
BADC are accounted for using deferral hedge accounting,<br />
which requires the unrealized gains or losses to be deferred<br />
as a net asset until gains or losses relating to the hedge are<br />
recognized.<br />
For debts dominated in foreign currencies that are hedged<br />
using foreign currency forward contracts, the Company and<br />
its certain subsidiaries record such debts at the contracted<br />
forward rates and no gain or loss is recognized.<br />
The Company and its certain subsidiaries manage risks<br />
associated with adverse fluctuations in foreign currency<br />
exchange rates and changes in interest rates on securities,<br />
using foreign currency forward contracts and interest rate<br />
swaps, respectively. The Company is also exposed to the<br />
risk of credit loss in the event of non-performance by the<br />
counterparties to the currency and interest-rate contracts;<br />
however, it does not anticipate non-performance by any of<br />
these counterparties, and all of them are financial institutions<br />
with high credit ratings. The Company does not hold or issue<br />
derivative financial instruments for speculative trading<br />
purposes. The Company has developed hedging policies to<br />
control various aspects of derivative financial transactions<br />
including authorization levels, transaction volumes and counterparty<br />
credit guidelines. Under the policies, in particular, the<br />
finance group of the Company executes, manages and<br />
reports the hedge transactions on a timely basis.<br />
The Company compares periodically cumulative changes<br />
in hedging instruments with those of hedged items when<br />
assessing effectiveness of the hedge. In case crucial terms of<br />
assets or liabilities designated for hedges are identical, the<br />
Company does not perform such assessment.<br />
(m) Reclassification<br />
Certain reclassifications have been made to prior year balances<br />
in order to conform to the current year presentation.<br />
3<br />
Cash and Equivalents<br />
Cash and equivalents as of August 31, 2007 and 2006 consist<br />
of the following:<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Cash ¥064,091 ¥121,950 $0,552,175<br />
Time deposits with maturity<br />
over three months (112) (129) (965)<br />
Marketable securities 55,237 25,237 475,894<br />
Securities other<br />
than MMFs — (5,654) —<br />
Cash and equivalents ¥119,216 ¥141,404 $1,027,104<br />
4<br />
Short-term Investments and Investments in Securities<br />
Investments in securities as of August 31, 2007 and 2006 are<br />
classified as available-for-sale securities.<br />
The following tables summarize acquisition costs and fair<br />
values of securities with available fair values as of August 31,<br />
2007 and 2006:<br />
(a) Securities with available fair values<br />
Millions of Yen<br />
Acquisition Fair<br />
Unrealized<br />
gains<br />
As of August 31, 2007 cost value (losses)<br />
Securities with available fair<br />
values exceeding acquisition<br />
cost:<br />
Equity securities ¥0,342 ¥0,699 ¥357<br />
Other 3,425 3,969 544<br />
Securities with available fair<br />
values not exceeding<br />
acquisition cost:<br />
Equity securities 2 2 (0)<br />
Other — — —<br />
Total ¥3,769 ¥4,670 ¥901<br />
FAST RETAILING ANNUAL REPORT 2007 59
Millions of Yen<br />
Acquisition Fair<br />
Unrealized<br />
gains<br />
As of August 31, 2006 cost value (losses)<br />
Securities with available fair<br />
values exceeding acquisition<br />
cost:<br />
Equity securities ¥0,342 ¥0,619 ¥277<br />
Other<br />
Securities with available fair<br />
values not exceeding<br />
acquisition cost:<br />
3,425 3,791 366<br />
Equity securities 2 2 (0)<br />
Other — — —<br />
Total ¥3,769 ¥4,412 ¥643<br />
Thousands of U.S. Dollars<br />
Unrealized<br />
Acquisition Fair gains<br />
As of August 31, 2007 cost value (losses)<br />
Securities with available fair<br />
values exceeding acquisition<br />
cost:<br />
Equity securities $02,946 $06,022 $3,076<br />
Other 29,508 34,195 4,687<br />
Securities with available fair<br />
values not exceeding<br />
acquisition cost:<br />
Equity securities 17 17 (0)<br />
Other — — —<br />
Total $32,471 $40,234 $7,763<br />
The following table summarizes book values of securities<br />
with no fair values as of August 31, 2007 and 2006.<br />
(b) Securities with no available fair values<br />
The Company and subsidiaries are subject to a number of<br />
taxes based on income. The aggregate statutory tax rate for<br />
the Company was approximately 40.5% for the year ended<br />
2007, 2006 and 2005.<br />
Reconciliations between the statutory income tax rate and<br />
the effective income tax rate as a percentage of income<br />
before income taxes and minority interests for 2007 and<br />
2005 are as follows:<br />
60<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Equity securities ¥00,205 ¥00,524 $001,766<br />
Mutual funds 39,844 15,792 343,276<br />
Cash liquidity fund 11,018 — 94,925<br />
Cash reserve funds 405 — 3,489<br />
Others 0 5,654 0<br />
5 Income Taxes 6 Long-term Debt<br />
FAST RETAILING ANNUAL REPORT 2007<br />
2007 2005<br />
Statutory income tax rate: 40.5)% 40.5)%<br />
Increase in valuation allowance 5.8 —<br />
Equity in earnings of affiliated company — (2.6)<br />
Loss in earnings of affiliates 1.3 —<br />
Amortization of goodwill 2.6 3.0<br />
Other (1.1) 0.6<br />
Effective income tax rate 49.1)% 41.5)%<br />
The reconciliation for 2006 is not presented because the<br />
difference between the aggregate statutory tax rate and the<br />
effective income tax rate was immaterial.<br />
The tax effects of temporary differences that give rise to<br />
significant portions of the deferred tax assets and liabilities as<br />
of August 31, 2007 and 2006 are presented as follows:<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Total gross deferred tax assets:<br />
Accrued business tax ¥01,053 ¥02,105 $009,072<br />
Accrued bonus 1,558 1,721 13,423<br />
Allowance for doubtful debts — 375 —<br />
Loss on impairment 1,178 788 10,149<br />
Long-term prepaid expenses 376 376 3,239<br />
Operating loss carryforward 10,579 7,221 91,143<br />
Other 2,652 1,522 22,848<br />
17,396 14,108 149,874<br />
Valuation allowance (12,064) (8,458) (103,937)<br />
5,332 5,650 45,937<br />
Total gross deferred tax liabilities:<br />
Net unrealized gains on<br />
hedge transactions (7,129) (11,215) (61,420)<br />
Accrued business tax<br />
Net unrealized holding gains<br />
(—) (666) (—)<br />
on securities (256) (316) (2,206)<br />
Other (10) (20) (86)<br />
(7,395) (12,217) (63,712)<br />
Net deferred tax assets<br />
(liabilities) ¥ (2,063) ¥ (6,567) $ (17,775)<br />
Net deferred tax assets as of August 31, 2007 and 2006<br />
are reflected in the consolidated balance sheets under the<br />
following captions:<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Deferred tax assets—current ¥ 1,752 ¥(0,928 $ 15,094<br />
Deferred tax assets—non-current 684 552 5,892<br />
Deferred tax liabilities—current (4,499) (8,047) (38,761)<br />
Net deferred tax assets ¥(2,063) ¥(6,567) $(17,775)<br />
Long-term debt as of August 31, 2007 and 2006 is summarized<br />
as follows:<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Unsecured loans mainly<br />
from Japanese financial<br />
institutions, 4.08% interest<br />
on average, due 2008<br />
through 2014 ¥23,916 ¥22,105 $206,048<br />
Less current portion 4,484 2,521 38,632<br />
¥19,432 ¥19,584 $167,416
The annual maturities of long-term debt subsequent to<br />
August 31, 2007 are as follows:<br />
Millions Thousands of<br />
Year ending August 31 of Yen U.S. Dollars<br />
2008 ¥04,484 $038,632<br />
2009 3,348 28,845<br />
2010 2,631 22,667<br />
2011 13,019 112,165<br />
2012 221 1,904<br />
Thereafter 213 1,835<br />
¥23,916 $206,048<br />
7<br />
Accrued Retirement and Severance Obligations<br />
The Company has defined contribution plans. Expenses related<br />
to the defined contribution plans amounted to ¥196 million<br />
($1,689 thousand), ¥249 million and ¥176 million for the years<br />
ended August 31, 2007, 2006 and 2005, respectively.<br />
Certain consolidated subsidiaries have defined benefit<br />
plans to provide lump-sum retirement benefits to the employees.<br />
The service costs under the defined benefit pension<br />
plans were ¥213 million ($1,835 thousand) and ¥61 million for<br />
the years ended August 31, 2007 and 2006, respectively.<br />
Benefit obligations and plan assets are as follows:<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Projected benefit obligations ¥4,121 ¥3,925 $35,504<br />
Less: Plan assets (3,792) (3,707) (32,670)<br />
Unfunded benefit obligations 329 218 2,834<br />
Unrecognized gain resulting from<br />
adoption of new accounting<br />
standard 35 107 302<br />
Unrecognized actuarial gain (loss)<br />
Unrecognized prior service<br />
(8) 50 (69)<br />
benefit<br />
Accrued retirement and<br />
37 62 319<br />
severance obligations ¥0,393 ¥0,437 $03,386<br />
8<br />
Capital and Additional Paid-in Capital<br />
The Company’s common stock has no par value in accordance<br />
with the Japanese Corporate Law (JCL). Under the<br />
JCL, at least 50% of the paid-in amount of new shares is<br />
designated as stated capital, and proceeds in excess of the<br />
amount designated as stated capital are credited to additional<br />
paid-in capital.<br />
The Company has authorized for issuance 300 million shares<br />
of common stock with no par value as of August 31, 2007.<br />
Issued and outstanding shares were 106,073,656 shares for<br />
each of the three years in the period ended August 31, 2007.<br />
9<br />
Legal Reserves and Dividends<br />
The JCL requires an amount equal to at least 10% of distributions<br />
of retained earnings be appropriated as legal reserves,<br />
which are included in additional paid-in capital and retained<br />
earnings, until they equal 25% of stated capital. Under the<br />
JCL, capital, additional paid-in capital and retained earnings,<br />
including legal reserves, can generally be transferred to each<br />
other upon resolution of the shareholders’ meeting.<br />
Additional paid-in capital and retained earnings less legal<br />
reserves and certain adjustments thereto may be available for<br />
dividends by resolution of the board of directors’ meeting.<br />
Distributions of retained earnings during the years ended<br />
August 31, 2006 and 2005, respectively, represent dividends<br />
and directors’ bonuses paid out during those periods. The<br />
accompanying consolidated financial statements do not<br />
include any provision for dividends of ¥60 ($0.52) per share,<br />
aggregating ¥6,111 million ($52,649 thousand). These dividends<br />
were approved at the meeting of the Board of Directors<br />
held on November 5, 2007 in respect of the fiscal year ended<br />
August 31, 2007.<br />
10<br />
Treasury Stock<br />
The JCL allows repurchase of treasury stock to the extent of distributable<br />
funds appropriated by resolution of the director’s<br />
meeting. In addition, the shareholders may request the<br />
Company to repurchase their shares of less than a trading unit<br />
(100 shares) upon request pursuant to the provision of the JCL.<br />
The changes in shares of treasury stock for the years ended<br />
August 31, 2007, 2006 and 2005 are summarized as follows.<br />
Millions Thousands of<br />
Shares of Yen U.S. Dollars<br />
Balance as of August 31, 2004 4,357,859 ¥16,035<br />
Repurchase of common stock 787 6<br />
Balance as of August 31, 2005 4,358,646 16,041<br />
Repurchase of common stock 495 4<br />
Issuance of treasury stock, net (137,232) (505)<br />
Balance as of August 31, 2006 4,221,909 15,540 $133,884<br />
Repurchase of common stock 711 6 52<br />
Issuance of treasury stock, net (60) (0) (0)<br />
Balance as of August 31, 2007 4,222,560 ¥15,546 $133,936<br />
11<br />
Pledged Assets<br />
As of August 31, 2007, the following assets are pledged as<br />
collateral for debts and other liabilities:<br />
Millions Thousands of<br />
of Yen U.S. Dollars<br />
Pledged assets:<br />
Time deposits ¥0,107 $00,922<br />
Inventories 58 500<br />
Other intangible assets 2,029 17,481<br />
Lease deposits 130 1,120<br />
Corresponding liabilities:<br />
Portion of long-term debt due<br />
¥2,324 $20,023<br />
within one year ¥0,476 $04,101<br />
Other current liabilities 12 103<br />
Long-term debt 1,643 14,155<br />
Other long-term liabilities 219 1,887<br />
¥2,350 $20,246<br />
FAST RETAILING ANNUAL REPORT 2007 61
12<br />
13<br />
Major items included in selling, general and administrative<br />
expenses for the years ended August 31, 2007, 2006 and<br />
2005 are as follows:<br />
62<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2005 2007<br />
Advertising and<br />
promotion ¥26,261 ¥22,231 ¥20,246 $226,251<br />
Salaries 52,126 38,578 31,510 449,091<br />
Rent 37,404 28,518 22,158 322,254<br />
Depreciation 6,567 5,409 2,433 56,578<br />
Amortization of<br />
goodwill 4,254 1,150 — 36,650<br />
Allowance for<br />
doubtful accounts 10 72 55 86<br />
Provision for accrued<br />
bonus—directors — 175 — —<br />
14<br />
Commitments and Contingencies<br />
The Company had the following contingent liabilities as of<br />
August 31, 2007.<br />
Selling, General and Administrative Expenses<br />
Impairment Loss<br />
During the fiscal year ended August 31, 2007, impairment<br />
losses have been recognized for buildings, structures,<br />
and certain other assets of some subsidiaries, namely<br />
<strong>UNIQLO</strong> USA, Inc., ONEZONE CORPORATION, and CABIN<br />
CO., LTD.<br />
The Company and consolidated subsidiaries identify<br />
groups of assets on a store basis as the smallest identifiable<br />
group of assets that generates cash inflow from continuing<br />
use that are largely independent of the cash inflows from<br />
other assets or groups of assets.<br />
The impairment loss was recognized for store assets with<br />
a significant decline in profitability. The total impairment loss<br />
of ¥1,476 million ($12,717 thousand), which represents an<br />
amount by which the carrying amount exceeds the recoverable<br />
amount, was recognized as other expense for the year<br />
ended August 31, 2007. They consisted of the following<br />
assets:<br />
Millions Thousands of<br />
Assets of Yen U.S. Dollars<br />
Buildings and structures ¥1,293 $11,140<br />
Furniture and equipment 111 956<br />
Leased assets 42 362<br />
Other 30 258<br />
¥1,476 $12,716<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Millions Thousands of<br />
of Yen U.S. Dollars<br />
Loan guarantees for:<br />
Employees’ benefit society ¥20 $172<br />
The recoverable value of retail store assets is estimated<br />
using the net sales price or value in use approaches. The<br />
value in use of such assets is estimated by discounting future<br />
cash flows from these assets at discount rates ranging from<br />
3.6% to 7.0% per annum. In addition, the unamortized<br />
amount of goodwill of a certain company accounted for<br />
under the equity method has been treated as an impairment<br />
loss of ¥642 million ($5,531 thousand) and presented among<br />
other expenses because this amount was deemed to be<br />
unrecoverable.<br />
15<br />
Leases<br />
All finance leases of the Company and subsidiaries in Japan,<br />
which do not result in the transfer of ownership of leased<br />
assets to the lessee, are accounted for as operating leases<br />
as permitted. Pro forma information of such finance leases<br />
are presented as follows as if such finance leases were capitalized.<br />
In the pro forma information, depreciation expenses<br />
are determined by the straight-line method over the lease<br />
term with no salvage value. Also, total interest expense is<br />
determined as a differential of total lease payment and acquisition<br />
cost of the leased assets, and the interest method is<br />
used for allocation over the lease term.<br />
Millions of Yen<br />
Thousands of<br />
U.S. Dollars<br />
2007 2006 2007<br />
Furniture, equipment and other:<br />
Acquisition costs ¥16,992 ¥16,985 $146,394<br />
Accumulated depreciation 8,867 10,374 76,394<br />
Impairment 66 22 569<br />
Net balance ¥08,059 ¥06,589 $069,431<br />
Thousands of<br />
Millions of Yen U.S. Dollars<br />
2007 2006 2005 2007<br />
Lease payments<br />
Reversal of allowance<br />
for loss on impairment<br />
¥3,358 ¥3,584 ¥4,195 $28,931<br />
of leased assets 10 — — 86<br />
Depreciation expenses 3,191 3,425 3,998 27,492<br />
Interest expenses 169 118 153 1,456<br />
Impairment loss 42 22 — 362<br />
Future minimum lease payments relating to finance leases<br />
accounted for as operating leases as of August 31, 2007 are<br />
as follows:<br />
Millions Thousands of<br />
Year ending August 31 of Yen U.S. Dollars<br />
2008 ¥2,535 $21,840<br />
2009 and thereafter 5,709 49,186<br />
¥8,244 $71,026
Future minimum lease payments relating to operating leases<br />
as of August 31, 2007 are as follows:<br />
Millions Thousands of<br />
Year ending August 31 of Yen U.S. Dollars<br />
2008 ¥13 $112<br />
2009 and thereafter ¥10 $086<br />
16<br />
Per Share Data<br />
Net income per share for the years ended August 31, 2007,<br />
2006 and 2005 is as follows:<br />
Yen U.S. Dollars<br />
2007 2006 2005 2007<br />
Basic ¥311.98 ¥397.38 ¥331.99 $2.69<br />
Diluted — 397.26 — —<br />
Under “Earnings Per Share” of the Accounting Standards<br />
Board of Japan, net income per share is based on the<br />
weighted average number of shares of common stock outstanding<br />
during the respective years. On a diluted basis, both<br />
net income and shares outstanding are adjusted assuming<br />
the exercise of rights relevant to potential shares. No diluted<br />
net income per share for 2007 and 2005 has been presented<br />
because there was no item with dilutive effect for those years.<br />
Net assets per share as of August 31, 2007 and 2006 are<br />
as follows:<br />
Yen U.S. Dollars<br />
2007 2006 2007<br />
Basic ¥2,357.79 ¥2,240.77 $20.31<br />
17<br />
Related Party Transactions<br />
The Company sells its products to a customer, which is<br />
wholly owned by a family member of one of the Company’s<br />
directors, as a franchisee. The terms of the transactions are<br />
consistent with those of other franchisees under the<br />
Company’s standard franchise agreement. The sales of products<br />
to the customer amounted to ¥43 million for the year<br />
ended August 31, 2006.<br />
There were no related party transactions during the year<br />
ended August 31, 2007.<br />
18<br />
Business Combinations<br />
¥23 $198<br />
Transactions under common control in the year ended<br />
August 31, 2007<br />
(a) Outline of the Transactions<br />
(1) Name and lines of business of the combined company<br />
Name: CABIN CO., LTD.<br />
Line of business: Retail sales of women’s apparel<br />
(2) Method of combination<br />
Purchase of subsidiary CABIN’s shares through a tender<br />
offer<br />
(3) Name of the combined company after the business<br />
combination<br />
CABIN CO., LTD. (CABIN)<br />
(4) Outline and objective of the transaction<br />
FAST RETAILING CO., LTD. (the “Company”), implemented<br />
a public tender offer for the shares of CABIN, from July<br />
23, 2007, through August 20, 2007, and purchased a<br />
total of 18,346,003 shares. As a result, the Company<br />
owned 93.9% of CABIN’s shares following the tender offer<br />
(which represented voting rights of 96.9%).<br />
The objective of this transaction was to make CABIN a<br />
wholly owned subsidiary of the Company to strengthen the<br />
cooperative relationships between the FAST RETAILING<br />
Group (the “Group”), including the Company and its subsidiaries<br />
and affiliates, and CABIN, with the aim of restructuring<br />
the business operations of CABIN. As a result of the<br />
consummation of the tender offer, a structure has been<br />
created that will allow for the rapid execution of business<br />
measures as well as the flexible and nimble implementation<br />
of management strategies. The Company’s intention is to<br />
make a transition to business arrangements that more<br />
clearly reflect the commitment of the Group.<br />
(b) Outline of Accounting Treatment<br />
This transaction corresponds to a transaction with a minority<br />
shareholder. The amount corresponding to the ownership<br />
interest represented by the additional shares purchased is subtracted<br />
from minority interests; the increase in the ownership<br />
interest of the parent company as a result of the purchase of<br />
additional shares is offset against the additional investment<br />
amount; then, the differential between the additional interest<br />
and the additional investment amount is treated as goodwill.<br />
(c) Details of Acquisition Cost of the Company Acquired<br />
Millions Thousands of<br />
of Yen U.S. Dollars<br />
Payments for purchase of<br />
common shares ¥13,025 $112,217<br />
Direct costs incurred in the acquisition 138 1,189<br />
Total acquisition cost ¥13,164 $113,414<br />
(d) Amount of Goodwill Incurred, Reasons for<br />
Recognizing Goodwill, Amortization Method<br />
and Amortization Term<br />
(1) Amount of goodwill: ¥3,079 million ($26,527 thousand)<br />
(2) Reasons for recognizing goodwill: The acquisition price<br />
paid for the purchase of additional CABIN shares was in<br />
excess of the decline in minority interests resulting from<br />
the acquisition of additional shares.<br />
(3) Method and term of amortizing the goodwill: straight-line<br />
basis over seven years<br />
FAST RETAILING ANNUAL REPORT 2007 63
19<br />
64<br />
Segment Information<br />
Information by Business Segment<br />
As net sales, operating income and total assets from the Apparel-related business of the Company and its consolidated subsidiaries<br />
constituted more than 90% of the consolidated totals for the years ended August 31, 2007 and 2006, the information by<br />
business segment for fiscal 2007 and 2006 is not presented.<br />
Information by Geographic Area<br />
As net sales and total assets in Japan constituted more than 90% of the consolidated totals, the information by geographic area for<br />
fiscal 2006 is not presented.<br />
Millions of Yen<br />
Year ended August 31, 2007 Japan Europe Others Total<br />
Eliminations<br />
and Corporate Consolidated<br />
I. Net sales and operating income (loss):<br />
External sales ¥471,711 ¥39,766 ¥13,726 ¥525,203 ¥ — ¥525,203<br />
Intersegment sales — 206 43 249 (249) —<br />
Total 471,711 39,972 13,769 525,452 (249) 525,203<br />
Operating expenses 412,270 35,708 14,054 462,032 (1,792) 460,240<br />
Operating income (loss) ¥059,441 ¥04,264 ¥00(285) ¥063,420 ¥01,543 ¥064,963<br />
II.Total assets ¥211,094 ¥57,719 ¥12,977 ¥281,790 ¥77,980 ¥359,770<br />
Thousands of U.S. Dollars<br />
Year ended August 31, 2007 Japan Europe Others Total<br />
Eliminations<br />
and Corporate Consolidated<br />
I. Net sales and operating income (loss):<br />
External sales $4,064,022 $342,604 $118,256 $4,524,882 $ — $4,524,882<br />
Intersegment sales — 1,775 370 2,145 (2,145) —<br />
Total 4,064,022 344,379 118,626 4,527,027 (2,145) 4,524,882<br />
Operating expenses 3,551,908 307,642 121,082 3,980,632 (15,438) 3,965,194<br />
Operating income (loss) $0,512,114 $036,737 $0 (2,456) $0,546,395 $013,293 $0,559,688<br />
II.Total assets $1,818,678 $497,278 $111,804 $2,427,760 $671,836 $3,099,596<br />
Notes: 1. Countries and regions are classified according to geographic proximity.<br />
2. Principal countries and regions other than Japan are<br />
Europe: France, United Kingdom<br />
Others: Asia outside Japan, North America<br />
3. Expenses included in Eliminations and Corporate that could not be allocated among geographic areas amounted to ¥9,396 million ($80,951 thousand) and included the expenses<br />
of the Company’s administrative departments.<br />
4. Corporate assets of ¥83,293 million ($717,610 thousand) included within Eliminations and Corporate principally consisted of cash available for management (cash, deposits, and<br />
securities) and assets of the administration departments of the Company.<br />
Overseas Net Sales<br />
As overseas net sales constituted less than 10% of consolidated net sales, the overseas net sales information for fiscal 2006 is not<br />
presented.<br />
Millions of Yen Thousands of U.S. Dollars<br />
Year ended August 31, 2007 Europe Others Total Europe Others Total<br />
I. Overseas net sales ¥39,972 ¥13,769 ¥053,741 $344,378 $118,627 $0,463,005<br />
II. Consolidated net sales<br />
III. Percentage of overseas sales<br />
¥525,203 $4,524,882<br />
in consolidated net sales 7.6% 2.6% 10.2% 7.6% 2.6% 10.2%<br />
Notes: 1. Countries and regions are classified according to geographic proximity.<br />
2. Principal countries and regions in each geographic area<br />
Europe: France, United Kingdom<br />
Others: Asia outside Japan, North America<br />
3. Overseas net sales are defined as net sales of the Company and its consolidated subsidiaries in countries or regions outside Japan.<br />
FAST RETAILING ANNUAL REPORT 2007
Report of Independent Auditors<br />
The Board of Directors<br />
FAST RETAILING CO., LTD.<br />
We have audited the accompanying consolidated balance sheets of FAST RETAILING CO., LTD. and consolidated subsidiaries as<br />
of August 31, 2006 and 2007, and the related consolidated statements of income, change in net assets, and cash flows for the<br />
three years in the period ended August 31, 2007, all expressed in yen. These financial statements are the responsibility of the<br />
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.<br />
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan<br />
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An<br />
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit<br />
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the<br />
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.<br />
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of<br />
FAST RETAILING CO., LTD. and consolidated subsidiaries as of August 31, 2006 and 2007, and the consolidated results of their<br />
operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.<br />
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended August 31, 2007<br />
are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our<br />
opinion, such translation has been made on the basis described in Note 1.<br />
November 26, 2007<br />
FAST RETAILING ANNUAL REPORT 2007 65
History<br />
1949.3<br />
Men’s Shop Ogori Shoji<br />
founded as a private enterprise<br />
in Ube City, Yamaguchi<br />
Prefecture.<br />
1963.5<br />
Ogori Shoji Co., Ltd., established,<br />
with capital of ¥6 million,<br />
as a successor to the<br />
original business.<br />
1984.6<br />
The first <strong>UNIQLO</strong> store specializing<br />
in casual clothing<br />
opened in Hiroshima City<br />
(<strong>UNIQLO</strong> Fukuromachi store;<br />
closed in August 1991).<br />
1985.6<br />
The first <strong>UNIQLO</strong> roadside<br />
store opened. Following<br />
immediate success, the<br />
format was adopted as the<br />
new standard.<br />
1991.9<br />
The Company’s name<br />
changed from Ogori Shoji<br />
to FAST RETAILING CO., LTD.<br />
1994.7<br />
The Company’s stock listed<br />
on the Hiroshima Stock<br />
Exchange.<br />
1997.4<br />
The Company’s stock listed<br />
on the Second Section of the<br />
Tokyo Stock Exchange.<br />
66<br />
1998.2<br />
The Head Office constructed<br />
in Yamaguchi Prefecture.<br />
1998.10<br />
The ¥1,900 fleece campaign<br />
attracted great public attention.<br />
1998.11<br />
The first downtown store<br />
opened in the fashionable<br />
Harajuku district of Tokyo.<br />
1999.2<br />
The Company’s stock listed<br />
on the First Section of the<br />
Tokyo Stock Exchange.<br />
1999.4<br />
The Shanghai Office established<br />
to further enhance<br />
production management.<br />
2000.4<br />
The headquarter functions<br />
moved to Tokyo to promote<br />
merchandising and marketing.<br />
FAST RETAILING ANNUAL REPORT 2007<br />
2000.10<br />
Internet online sales business<br />
launched.<br />
2001.9<br />
<strong>UNIQLO</strong>’s first overseas<br />
expansion began with store<br />
openings in London.<br />
2002.4<br />
<strong>UNIQLO</strong> Design Studio (current<br />
R&D Center) established.<br />
2002.9<br />
Opened first two <strong>UNIQLO</strong><br />
stores in Shanghai, China.<br />
2002.11<br />
Started food business under<br />
the SKIP brand name (exited<br />
the business in April 2004).<br />
2003.10<br />
The cashmere campaign stimulated<br />
high consumer interest.<br />
2004.1<br />
Took an equity stake in Link<br />
International Co.,Ltd. (now<br />
LINK THEORY HOLDINGS<br />
CO.,LTD.), marketer of the<br />
Theory apparel brand.<br />
2004.2<br />
National Standard Inc., marketer<br />
of the national standard<br />
women’s apparel brand,<br />
became a consolidated subsidiary.<br />
(Withdrew in March<br />
2006)<br />
2004.10<br />
Opened the first largeformat<br />
<strong>UNIQLO</strong> store in<br />
Shinsaibashi, Osaka.<br />
2004.12<br />
Established <strong>UNIQLO</strong> Design<br />
Studio, New York, Inc. design<br />
subsidiary to help strengthen<br />
the R&D function.<br />
2005.3<br />
Footwear retail chain ONE-<br />
ZONE CORPORATION (store<br />
names include FOOTPARK,<br />
etc.) became a consolidated<br />
subsidiary.<br />
<strong>UNIQLO</strong> is the cornerstone of the business portfolio of FAST RETAILING CO., LTD., which was founded<br />
in 1963. The first <strong>UNIQLO</strong> store was opened in Hiroshima in 1984, and, since then, the Company<br />
opened a series of stores throughout Japan and listed its shares on the Hiroshima Stock Exchange in<br />
1994. Its network of stores grew to become Japan’s largest apparel chain, with more than 300 stores<br />
as of 1997. The store that opened in the trendy Harajuku district in 1998 was <strong>UNIQLO</strong>’s first store in<br />
urban Tokyo, and a fleece campaign in October of the same year created a surge in demand for its<br />
products.<br />
Net sales doubled in the years ended August 31, 2000 and 2001, but net sales and income fell back.<br />
To sustain growth, the Company moved in November 2005 to a holding company structure and took<br />
steps to refocus on the entrepreneurial values, enhance Group management, and make its operations<br />
more global.
2005.5<br />
Obtained management control<br />
of NELSON FINANCES<br />
S.A.S., developer of the<br />
COMPTOIR DES COTON-<br />
NIERS French casual clothing<br />
brand.<br />
2005.5<br />
Established COMPTOIR DES<br />
COTONNIERS JAPAN CO.,<br />
LTD., with the aim of developing<br />
the brand in Japan.<br />
2005.9<br />
ASPESI Japan Co., Ltd., set<br />
up as a consolidated subsidiary<br />
to market the Italian<br />
ASPESI brand in Japan.<br />
2005.9<br />
Opened first <strong>UNIQLO</strong> store in<br />
South Korea (Seoul).<br />
2005.9<br />
Opened first store in United<br />
States (New Jersey).<br />
2005.9<br />
Opened first store in Hong<br />
Kong (Tsim Sha Tsui shopping<br />
district).<br />
2005.9<br />
Opened first women’s inner<br />
wear specialty store, BODY<br />
by <strong>UNIQLO</strong>, in Tokyo’s Ginza<br />
shopping district.<br />
(Billions of yen)<br />
600<br />
2005.9<br />
Opened <strong>UNIQLO</strong> flagship<br />
store in Ginza, Tokyo.<br />
2005.10<br />
Opened first <strong>UNIQLO</strong> KIDS<br />
store.<br />
2005.11<br />
Shifted to a holding company<br />
structure to strengthen<br />
<strong>UNIQLO</strong> operations and drive<br />
new business expansion.<br />
2006.2<br />
PETIT VEHICULE S.A.<br />
becomes a FAST RETAILING<br />
subsidiary developing the<br />
PRINCESSE TAM.TAM brand<br />
in France and other parts of<br />
Europe.<br />
2006.3<br />
Established G.U. CO., LTD. to<br />
develop low-priced casual<br />
clothing g.u. brand stores.<br />
2006.4<br />
Invested in CABIN CO., LTD.<br />
to develop, design, and retail<br />
women’s clothing (store<br />
names include ZAZIE,<br />
enraciné, etc.) (Became a subsidiary<br />
in August 2006)<br />
2006.6<br />
<strong>UNIQLO</strong> CO., LTD. formed a<br />
business tie-up to create a<br />
strategic partnership with<br />
TORAY INDUSTRIES, INC.<br />
2006.9<br />
Commenced activities to<br />
recycle all <strong>UNIQLO</strong> products.<br />
2006.10<br />
The first g.u. store opened in<br />
Ichikawa City, Chiba<br />
Prefecture.<br />
2006.11<br />
Signed a business and capital<br />
alliance agreement with<br />
VIEWCOMPANY CO.,LTD.,<br />
developer of the chain of<br />
VIEW and COO ICI shoe<br />
stores for women.<br />
2006.11<br />
<strong>UNIQLO</strong> New York Soho store<br />
opened in New York City as<br />
the first global flagship store<br />
with 3,300 square meters of<br />
sales floor space.<br />
2007.3<br />
Opened the Kobe Harborland<br />
store, the largest <strong>UNIQLO</strong><br />
store in Japan, with over<br />
3,300 square meters of floor<br />
space.<br />
2007.4<br />
Opened T-shirt specialty store<br />
UT STORE HARAJUKU.<br />
2007.11<br />
Opened a global flagship<br />
store on London’s Oxford<br />
Street.<br />
Sales and Stores of FAST RETAILING Group � Stores (including franchise stores) � Sales<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
7 8 11 13 15 22 25 29 62 90 118<br />
176<br />
229 276<br />
336 368<br />
FY 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007<br />
433<br />
519<br />
585 622 655<br />
1,232<br />
1,632<br />
1,828<br />
Note: On a consolidated basis from fiscal 2002.<br />
FAST RETAILING ANNUAL REPORT 2007 67
Investor Information<br />
(As of August 31, 2007)<br />
Securities Code: 9983<br />
Stock Exchange Listing: First Section on TSE<br />
Stock Information<br />
Number of shares authorized 300,000,000<br />
Number of issued and outstanding shares 106,073,656<br />
Number of shareholders<br />
(including holders of treasury stock) 14,789<br />
Principal Shareholders<br />
68<br />
Percentage of<br />
Number total shares<br />
of shares in issue (%)<br />
Tadashi Yanai 28,297,284 26.68<br />
Japan Trustee Services Bank, Ltd. 6,756,000 6.37<br />
The Master Trust Bank of Japan, Ltd. 6,675,500 6.29<br />
Kazumi Yanai 4,781,808 4.51<br />
Koji Yanai 4,780,600 4.51<br />
Fight & Step Co., Ltd. 4,750,000 4.48<br />
FAST RETAILING CO., LTD. 4,222,560 3.98<br />
MASTERMIND Co., Ltd. 3,610,000 3.40<br />
Trust Custody Services Bank, Ltd. 2,396,200 2.26<br />
Teruyo Yanai 2,327,848 2.19<br />
Shareholder Breakdown<br />
Number Percentage of<br />
Number of of shares total shares<br />
shareholders (Thousands) in issue (%)<br />
Individuals and others 14,149 48,911 46.11<br />
Foreign investors 346 19,433 18.33<br />
Other financial institutions 80 21,213 20.00<br />
Companies and corporations 155 8,992 8.48<br />
Securities companies 59 7,512 7.08<br />
Total 14,789 106,073 100.00<br />
FAST RETAILING ANNUAL REPORT 2007<br />
Stock Price (Yen)<br />
8,920<br />
8,680 8,570<br />
8,130<br />
7,680 7,830<br />
9 10<br />
2005<br />
12,480<br />
11,850<br />
8,380<br />
9,190<br />
11 12 1<br />
2006<br />
10,910<br />
2<br />
11,550<br />
9,620 9,770<br />
3<br />
12,200<br />
10,630<br />
4<br />
10,970<br />
9,600<br />
5<br />
10,230<br />
9,860<br />
6<br />
11,700<br />
11,590<br />
11,220 11,130<br />
11,640<br />
11,090<br />
9,140<br />
8,830<br />
8,680<br />
Trading Volume (Thousands of Shares)<br />
9 10<br />
2005<br />
20,254<br />
11 12 1<br />
2006<br />
2<br />
3<br />
4<br />
5<br />
6<br />
7<br />
7<br />
8<br />
8<br />
10,210<br />
9<br />
9<br />
10,810<br />
10,230<br />
9,770<br />
9,430<br />
9,560<br />
9,470<br />
10,140<br />
9,430<br />
9,330<br />
8,980<br />
9,130<br />
8,530 8,500<br />
8,110<br />
8,040 7,600<br />
10 11 12 1<br />
2007<br />
16,704<br />
15,053<br />
13,172<br />
13,230<br />
11,144 11,393 10,090<br />
9,904 9,023 9,422 9,89210,503 10,794 11,54312,080<br />
19,376<br />
10 11 12 1<br />
2007<br />
The latest IR information can be found on our Website at: http://www.fastretailing.com/eng/ir/<br />
You can view a video of our latest business results<br />
meeting here.<br />
Our basic policies for IR activities are available here.<br />
Click here for the latest news releases.<br />
You can check on the monthly trends in <strong>UNIQLO</strong> Japan<br />
sales here.<br />
The latest IR publications, including annual reports and<br />
business reviews, are available here.<br />
FAST RETAILING was selected as one of the recipients of Daiwa Investor Relations Co., Ltd.’s Best IR Website Award in 2007.<br />
2<br />
13,415<br />
2<br />
3<br />
3<br />
4<br />
18,441<br />
16,249<br />
4<br />
5<br />
5<br />
6<br />
13,284<br />
12,390<br />
6<br />
6,660<br />
6,360<br />
7<br />
17,834<br />
7<br />
8<br />
22,932<br />
8
Corporate Information<br />
Corporate Data (As of December 31, 2007)<br />
FAST RETAILING CO., LTD.<br />
Head Office<br />
717-1, Sayama, Yamaguchi City,<br />
Yamaguchi 754-0894, Japan<br />
Tokyo Office<br />
Kitanomaru Square,<br />
13-12, Kudan-kita 1-chome,<br />
Chiyoda-ku,<br />
Tokyo 102-0073, Japan<br />
Established<br />
May 1, 1963<br />
Paid-in Capital<br />
¥10,274 million<br />
Line of Business<br />
Control and management of overall<br />
Group activities as owner and holding<br />
company<br />
Number of Full-time Employees<br />
(Consolidated)<br />
6,514 (As of August 31, 2007)<br />
Settlement Date<br />
August 31<br />
Annual Shareholders’ Meeting<br />
End of November<br />
Transfer Agent<br />
The Mitsubishi UFJ Trust and<br />
Banking Corporation<br />
4-5, Marunouchi 1-chome, Chiyoda-ku,<br />
Tokyo 100-8212, Japan<br />
Number of Shares per Trading Unit<br />
100<br />
Additional copies of this annual report and other<br />
information may be obtained by contacting:<br />
Investor Relations Department<br />
FAST RETAILING CO., LTD.<br />
Kitanomaru Square, 13-12, Kudan-kita 1-chome,<br />
Chiyoda-ku, Tokyo 102-0073, Japan<br />
Telephone: +81-3-6272-0070<br />
Facsimile: +81-3-6272-0076<br />
Board of Directors<br />
(As of December 31, 2007)<br />
Tadashi Yanai<br />
Chairman, President & CEO<br />
Masa Matsushita<br />
Executive Vice President<br />
Toru Hambayashi *1<br />
Nobumichi Hattori *1<br />
Toru Murayama *1<br />
Statutory Auditors’ Board<br />
(As of December 31, 2007)<br />
Akira Tanaka<br />
Takaharu Yasumoto *2<br />
Norihiko Shimizu *2<br />
Akira Watanabe *2<br />
Minoru Ota *2<br />
*1 External board member<br />
*2 External auditor<br />
Main Group Companies<br />
(As of December 31, 2007)<br />
<br />
<strong>UNIQLO</strong> CO., LTD.<br />
717-1, Sayama, Yamaguchi City,<br />
Yamaguchi 754-0894, Japan<br />
<strong>UNIQLO</strong>(U.K.)LTD.<br />
Top Floor 93-97 Clarence Street,<br />
Kingston Upon Thames, Surrey,<br />
KT1 1QY, U.K.<br />
FAST RETAILING(CHINA)<br />
TRADING CO., LTD.<br />
Rm. 1602, Xuhui Garden Building,<br />
No.1089, Zhongshan Er Road (South),<br />
Shanghai, China 200030<br />
<strong>UNIQLO</strong> USA, Inc.<br />
101 Avenue of the Americas, 11th Floor,<br />
New York, NY 10013, U.S.A.<br />
Forward-Looking Statements<br />
FRL Korea Co., Ltd.<br />
5F, 24-11 Chungmuro 1ga,<br />
Jung-gu, Seoul, 100-011, Korea<br />
<strong>UNIQLO</strong> HONG KONG, LIMITED<br />
No. 806, 8/F., Miramar Tower, No. 132<br />
Nathan Road, TST, Kowloon, Hong Kong<br />
FR FRANCE S.A.S.<br />
17 avenue de l’Opera, 75001 Paris, France<br />
Créations Nelson S.A.S.<br />
58 rue St Lazare, 75009 Paris, France<br />
PETIT VEHICULE S.A.S.<br />
39 rue Maurice Gunsbourg F-94851<br />
Ivry-sur-Seine cedex, France<br />
G.U. CO., LTD.<br />
Kudan IS Building 5F,<br />
3-5, Kudan-kita 1-chome, Chiyoda-ku,<br />
Tokyo 102-0073, Japan<br />
ONEZONE CORPORATION<br />
Shishikura Building,<br />
10-11, Kiba 5-chome,<br />
Koto-ku, Tokyo 135-0042, Japan<br />
CABIN CO., LTD.<br />
Lions Mansion Nishishinjuku 1F,<br />
15-5, 3-chome, Shinjuku-ku,<br />
Tokyo 160-0023, Japan<br />
ASPESI Japan Co., Ltd.<br />
Pansée Building 2F,<br />
13-11, Minami-Aoyama 5-chome,<br />
Minato-ku, Tokyo 107-0062, Japan<br />
<br />
LINK THEORY HOLDINGS CO.,LTD.<br />
4-35, Minami-Aoyama 5-chome,<br />
Minato-ku, Tokyo 107-0062, Japan<br />
VIEWCOMPANY CO.,LTD.<br />
Daiko-Shinosaka Building 11F,<br />
3-39 Miyahara 4-chome, Yodogawa-ku,<br />
Osaka City, Osaka 532-0003, Japan<br />
Statements in this annual report with respect to the Company’s plans, strategies,<br />
forecasts, and other statements that are not historical facts are forwardlooking<br />
statements that are based on management’s judgment in light of currently<br />
available information. Factors that could cause actual results to differ<br />
materially from our earnings forecasts include, without limitation, global economic<br />
conditions, our response to market demand for and competitive pricing<br />
pressure on products and services, and currency exchange rate fluctuations.<br />
FAST RETAILING ANNUAL REPORT 2007 69
FAST RETAILING CO., LTD.<br />
www.fastretailing.com<br />
Printed in Japan